ASIC’s recently released measures to facilitate the provision of financial advice about the COVID-19 early release arrangements includes a ‘no-action’ position on expanded intra-fund advice.
According to ASIC, intra-fund advice that is paid by all members out of fund assets rather than charged directly to the member receiving the advice (subsidised personal financial product advice) ‘may not allow the financial position of the member’s household to be taken into account’.
ASIC states that from 14 April 2020 until 25 September 2020, it will not take regulatory action against a super trustee solely for a breach of section 99F of the Superannuation Industry (Supervision) Act, provided certain conditions are met, in particular that the advice:
Other conditions apply including that the no-action position only applies if a super trustee informs ASIC that it will rely on the no-action by no later than within 30 days of first relying on it (this can be done by email) and the advice is requested by a member rather than initiated by the super fund.
As ASIC points out, the no-action need not be relied on, and there may be other ways of assisting members.
But is the no-action necessary at all? Does reliance on it expose funds to regulatory risks?
ASIC’s no-action suggests the nature of the ‘fact-find’ (to ascertain relevant objectives, financial situation and needs), rather than the nature of advice is relevant to section 99F. Section 99F requires that any subsidised personal financial product advice is about a member’s superannuation interest in a fund. As long as the advice to an existing member of a fund does not relate to a ‘financial product that is not a beneficial interest in the fund, a related pension fund for the member and the fund, a related insurance product for the member and the fund or a cash management facility within the fund’ or consolidation of multiple superannuation interests across different funds, section 99F is unlikely to be infringed. The consideration of a member’s broader financial position such as household expenses and cashflow and the provision of information or advice about government benefits and other support or relief (unrelated to a specific financial product and provided there is no opinion or recommendation about withdrawing monies from another superannuation fund or investment product) as part of the formulation of the personal financial product advice relating to an interest in a super fund does not mean that advice is NOT about a member’s interest in the fund.
Whether or not ASIC’s reasoning for its no-action position is correct, it has implications for the conduct of personal intra-fund advice activities met from fund assets (in accordance with s99F) more generally, particularly intra-fund advice about contributions, insurance and investments where existing practices involve a consideration of the financial situation of a member’s household, and government benefits or other available financial benefits (whether derived from sources that are NOT financial products, or derived from other financial products but are in no way the subject matter of the intra-fund advice). Any view held by ASIC will be relevant to its surveillance activities. The requirement for a trustee to notify ASIC of reliance on the no-action position may also place that trustee into the regulatory ‘spotlight’.
Trustees should consider the risks and benefits of relying on the no-action position, taking into account past practices and any legal advice previously received.
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