ASIC Raises Concern on FDS Compliance

ASIC has voiced its concern over consumers receiving financial advice who are potentially at risk of receiving incorrect information about advice fees, or in some cases, being charged fees after ongoing fee arrangements have terminated, following the release of its new report on fee disclosure obligations.

ASIC Commissioner, Danielle Press

The regulator’s report, Compliance with the fee disclosure statement and renewal notice obligations, reveals ASIC’s compliance assessments of fee disclosure statements (FDSs) and renewal notices (RNs) issued by 30 randomly-sampled AFS licensees and their representatives.

The review focused on whether the fee disclosure documents provided to clients complied with the law and if not, the nature of the failures.

ASIC stated a total 1496 FDSs and 373 RNs were collected and analysed in its review, along with fee disclosure policies and procedures.

The review found that non-compliance by fee recipients ranged from less material and technical breaches to more significant breaches. It stated: 

  • 7% of the FDSs required to be given to clients by law, were not given
  • In 35% of the instances when an RN was required, an RN was not given

It also commissioned a compliance consultant to review 176 FDSs in detail to determine whether the contents complied with legal requirements. Of the 176 FDSs reviewed in detail:

  • 80% did not include all the required information about services that clients were entitled to receive
  • 73% did not cover all the information about services that clients received
  • 44% did not include the amount of each fee paid by the clients

When reviewing policies and procedures, ASIC found that more than half of licensees did not have effective processes to remind them when RNs are due or to turn off ongoing fees.

ASIC Commissioner, Danielle Press, said the findings have raised concerns about industry practices in relation to fee disclosure to clients.

“Our review has found widespread non-compliance with fee disclosure obligations across the sample of AFS licensees and their representatives, suggesting that compliance with the FDS and RN obligations may be an industry-wide problem,” she said.

“Our review has found widespread non-compliance with fee disclosure obligations…”

“Consumers are at risk of receiving inaccurate fee disclosure statements or in some cases, none at all. This is a timely reminder that while disclosure alone is not enough as a consumer protection mechanism, transparent and timely disclosure still has an important role to play.”

Press added, “The 30 licensees in our review have been advised of our concerns, and we are strongly urging all AFS licensees to immediately take steps to improve the robustness of their compliance measures.”

Click here to read ASIC’s full report which provides practical tips for AFS licensees and their representatives to improve their compliance with the FDS and RN obligations.