Regulator posts new conflicts guidelines

The Australian Securities and Investments Commission (ASIC) has worked looming conflict of interest legislation into its licensing regime by updating two of its licensing guides.

The two updated guides, the AFS Licensing Kit and Small business and your AFS licence: Compliance with Policy Statements 164 and 181 provide step-by-step instructions on how authorised representatives, like financial planners, can keep in line with conflict management requirements introduced by Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) legislation (CLERP 9).

From January 2005, under policy statements 181 and 165, authorised representatives, such as financial planners, will have to show they have adequate procedures in place to manage potential conflicts of interest that may arise in the course of their day-to-day activities. These potential conflicts of interest could include any situation where a planner is likely to receive financial benefits depending on whether the advice to the client is followed, like for example, if they were to receive higher trails for putting client funds into a preferred platform.

ASIC’s executive director of financial services regulation Ian Johnston said those applying for a new Australian Financial Services Licence will be asked to disclose how they are managing conflicts of interest in a new B3 proof document Arrangements for managing conflicts of interest.

Those who apply for an AFSL before January 1, 2005, won’t get off the hook, with ASIC requiring that proof of conflicts management be submitted separately before any pending applications are finalised.