ASIC grants relief to financial advisers advising consumers impacted by COVID-19

What you need to know

• Earlier this month, the Australian Government introduced measures to allow early access to superannuation for individuals facing hardship due to the COVID-19 pandemic (early release scheme).
• ASIC has announced measures to facilitate affordable and timely advice for consumers impacted by COVID-19. 
• ASIC's temporary relief measures from financial advice obligations apply to COVID-19 related advice only, and include lifting certain regulatory requirements and extending timeframes for advice provided by financial advisers, and allowing registered tax agents without an Australian financial services (AFS) licence to advise existing clients. 
• ASIC has adopted a temporary no-action position for trustees of regulated superannuation funds who provide intra-fund advice to their members.

What you need to do

• Financial advisers, registered tax agents and superannuation trustees seeking to rely on ASIC's relief and no-action position must observe the conditions attached to the relief. ASIC intends to conduct surveillance activities to monitor the advice provided in reliance of this relief.
• Superannuation trustees should notify ASIC via email, as soon as practicable, of their intention to rely on ASIC's no-action position for intra-fund advice.
• Financial advisers should keep up to date with ASIC updates or seek legal advice to ensure that they continue to comply with ASIC's new measures.
  
   

ASIC relief for COVID-19 early release of superannuation advice

ASIC has introduced relief from certain regulatory obligations for the financial advice industry as part of its COVID-19 response, in light of the Government's announcement of the superannuation early release scheme. The measures aim to facilitate affordable and timely financial advice for consumers inquiring about their eligibility under the scheme.

ASIC has put in place the following measures for the duration of the relief:

• Advice providers will not be required to give a Statement of Advice (SOA) to clients when providing early release scheme advice in certain circumstances.
• Registered tax agents may give advice to existing clients about the early release scheme without holding an AFS licence.
• ASIC has confirmed a no-action position for superannuation trustees which enables them to provide 'intra-fund advice' to members on the COVID-19 early release scheme. ‘Intra-fund advice’ is generally simpler, one-off advice on issues such as changing investment options and taking out insurance available through superannuation that a superannuation trustee can provide to members where the cost of the advice is borne by all members of the fund.

Financial advisers and registered tax agents seeking to rely on the relief must comply with the following conditions (among others):

• The client must have approached the provider for advice related to the early release scheme (i.e. no cold calling or other pro-active contact). 
• Advice fees must not exceed a cap of $300.
• The advice provider must issue a Record of Advice (ROA), instead of an SOA, which briefly sets out the recommendations made, including the eligible ground through which the client can access the early release scheme, why the client should apply for the early release and the implications of the early release on the client. 

A tax agent seeking to rely on the licensing relief is restricted to providing that advice to clients who have previously received a tax agent service from that tax agent, and the tax agent must not hold an AFS licence or be an authorised representative of an AFS licensee.

ASIC relief to extend timeframe for time-critical SOAs

Financial advisers providing time-critical advice relating to the COVID-19 pandemic are granted a 30 business day timeframe to issue clients with an SOA under ASIC's new urgent advice measures. This is an extension from the usual 5 business day timeframe, and is given to assist financial advisers with meeting their deadlines in light of the increased demand for financial advice induced by the COVID-19 pandemic. Financial advisers must give the client an SOA as soon as practicable after the COVID-19 advice is provided, and no later than 30 business days after the COVID-19 advice is provided.

ASIC relief to enable ROAs to be given to existing clients

Where an existing client of a financial adviser, or an associated providing entity (for example, another adviser in the same AFS licensee or practice) requires COVID-19 advice, ASIC's temporary relief measures allow an ROA to be provided when an SOA would usually be required. The client must expressly instruct, and the financial adviser must reasonably consider, that the personal advice is required because of the adverse economic effects of COVID-19, and the advice must relate to the same types of financial product on which advice has previously been provided.

ASIC's no-action position for intra-fund advice

ASIC has confirmed that under its no-action position, it will not take action in relation to personal advice relating to the COVID-19 early release scheme provided on an intra-fund advice basis, on the basis that it breaches s 99F of the Superannuation Industry (Supervision) Act 1993 (SIS Act). Importantly, the no-action position does not apply to advice about topics outside of the COVID-19 early release scheme (although it can make reference to the household circumstances of the member). The no-action position is subject to the following conditions: 

• The trustee must inform ASIC via email that it will rely on the no-action position before, or within 30 days of, first relying on it.
• The member must have sought the advice, rather than the trustee having initiated the advice.
• Before giving the advice, the trustee must determine that the member is likely to be eligible for the early release scheme, define the scope of the advice, make the member aware of relevant public factual information and existing general COVID-19 advice, and confirm that notwithstanding this information, the member wishes to seek additional advice.

ASIC recommends that superannuation trustees also consider what assistance they can provide to members without relying on the no-action position. For example, a superannuation trustee may be able to provide general advice (for instance, to members may have substantially less saved for retirement as a result of withdrawing their super early).

Personal advice is still personal advice. Accordingly a superannuation trustee seeking to rely on this no-action position must keep evidence that it has appropriate resources, training, procedures and controls to ensure the delivery of quality and compliant advice. ASIC has announced that it intends to undertake surveillance activity later this year to ensure that the advice provided in reliance on this no-action position is consistent with this no-action position and applicable legal obligations, including the duty to act in the best interests of members.

Superannuation trustees may however be able to take advantage of other elements of ASIC's relief package, for example, the ability to give an ROA rather than an SOA in certain circumstances.

Duration of relief

ASIC will provide 30 days' notice to the industry before deciding to revoke the instrument of relief, with any decision to follow market developments and key stakeholder consultations. The no-action position for superannuation trustees will lapse when the early release scheme is no longer in effect. Currently, ASIC has stated that the no action position is issued on 14 April 2020 and expires on 24 September 2020.

Authors: Lisa Simmons, Partner and Edwina Wang, Graduate.