A Professional Year query

A Professional Year query

This one got me thinking and I’m keen to hear people’s views…

Q: “A question I forgot to ask the other day, which was raised at my previous Licensee is when does the obligation to advise clients in writing begin. They believed Q3 as they felt the PY Candidate was not giving clients any advice until on the FAR in Q3 however I think the FPS003 may mean from Q1.  Can you please confirm it Is it from the very beginning of Q1 or from when they go on the FAR from the beginning of Q3?”

Answer …

Thanks for the query.

The obligation to notify the client in writing of the PY is most certainly applicable when the person attains the Provision Financial Adviser status. So, at the very least at the commencement of quarter 3.

This is confirmed in FPS003 which states “A Financial Services Licensee has an obligation to ensure that the retail clients who deal with a provisional relevant provider are informed in writing that the provider is undertaking supervised work and training and of the name and contact details of the supervisor.” (page 5).

Does it need to be made prior to this point?

In the Legislative Instrument section 10(5) it states:

“The responsible licensee of a person must ensure that, before the person has any direct or indirect interaction with a retail client, the client is informed, in writing:(a) that the person is undertaking supervised work and training; and
(b) of the name and contact details of the person’s supervisor.”

In the Explanatory Statement it states:

Notifications to retail clients – 35. Subsection 10(5) requires the responsible licensee to ensure that the retail clients who deal with a person are informed in writing that the person is undertaking supervised work and training and of the name and contact details of the supervisor. This is in addition to the requirements of subsection 921F(6) of the Act.

A person is defined as “an individual undertaking his or her professional year”

S921F(6) of the act states:

(6) A supervisor of a provisional relevant provider must ensure that a retail client is informed:
(a) of the name of each supervisor of the provisional relevant provider (even if the retail client has been informed of the name of each previous supervisor); and
(b) that the provisional relevant provider is undertaking work and training in accordance with subsection 921B(4); and
(c) that each supervisor is responsible for any personal advice provided by the provisional relevant provider to the client in relation to a relevant financial product.

Outcome

It appears the Corp Act references notification only be provided in relation to a provisional adviser. The Leg Instrument and Expl Statement contradict this by stating a “person” undertaking a PY, which means from the start of quarter 1.

I would argue it’s best practice (& prudent) to inform the client, in writing, from Quarter 1 onwards. 😊

————————————————————————————————————————————————————————————————————————————

Fourth Line is a rigorous RegTech risk management and compliance system for advice practices, dealer groups and other wealth management participants. Fourth Line uses algorithmic approaches to simplify the complexity in advice reviews whilst maintaining human oversight, empowering compliance teams to coach and develop strong advice behaviors through data driven insights from advanced analytics for adviser, practice/dealer group and industry benchmark comparison with centralised document storage and access to meet regulatory needs. 

For information email: info@fourth-line.com.au