ASIC Further Restricts Use of ‘Independent’

ASIC has further restricted the terms that can be used by advisers to indicate independence from institutions and product providers after seeking external legal advice on the matter.

The regulator stated that while ‘independent’, ‘impartial’, and ‘unbiased’ were restricted words under section 923a of the Corporations Act, uncertainty remained around the use of the terms ‘independently owned’, ‘non-aligned’ and ‘non-institutionally owned’.

Following legal advice, ASIC stated these latter words would now also be restricted to use only if an adviser satisfied the conditions set out in S923a, which requires they do not receive any commissions or volume-based payments, or other gifts or benefits and have no conflicts of interest or influence from any product issuer.

ASIC said given the uncertainty around the use of terms to date it would provide a six-month facilitative compliance period to allow advisers and advice firms to make changes to websites and documents and remove the terms ‘independently owned’, ‘non-aligned’ and ‘non-institutionally owned’

“…APLs could dictate the way an adviser or advice firm described themselves due to the restrictive nature of APLs controlling what products were available to an adviser…”

The facilitative compliance period would not apply to breaches of s923a in relation to ‘independent’, ‘impartial’, and ‘unbiased’ as these terms had already been considered under the Corporations Act, according to ASIC, which stated there had no uncertainty around their use.

APLs

ASIC also stated that APLs could dictate the way an adviser or advice firm described themselves due to the restrictive nature of APLs controlling what products were available to an adviser, with the level of restriction dependent on the operation and breadth of the APL.

“Where the APL is used as an open list of products or where there is an easy process to recommend a product that is not on the APL the restriction is less likely to prevent a financial service provider from calling themselves independent (assuming all the other conditions in s923A are met),” ASIC stated.

“Where the off-APL process is not easy to access, it is more likely to be considered a restriction, and as such, the financial service provider would not be permitted to use a restricted term,” it added.

Asset-based Fees

The regulator also stated that asset-based fees would not prevent advisers from using the restricted terms as these were not considered as forms of remuneration that were calculated on the basis of the volume of business placed by an adviser with an issuer of a financial product.