ROA and Foundation SOA Update from ASIC

by | Nov 23, 2021 | AFSL | 0 comments

Prepared by Catherine Evans

ASIC has issued further guidance on when ROAs can be used.

The guidance includes clarification on: 

  1. when a new SOA must be provided in change of licensee scenarios; and 
  2. the meaning of “significantly different” in relation to change in circumstances and the basis of advice. 

We’ll cover the second issue in a separate article.

ASIC flips their previous position

The key question in determining if a new SOA is required is: who is the ‘providing entity’? While RG 175 gives basic information about who the providing entity is, it does not provide guidance about the impact of a change in licensee. 

We have had a number of interactions with ASIC about this issue to try and obtain clarity for advice firms. Frustratingly, ASIC’s new guidance completely contradicts previous advice provided by ASIC to us. 

Previously, ASIC told us that whether a new SOA was required depended on who the providing entity was acting on behalf of.  This meant a change in licensee would ultimately change the nature of the providing entity (even if the CAR or individual AR remained the same). 

ASIC confirmed that on change of licensee, a foundation SOA would be required because of the words “by a person (the providing entity) in their capacity as authorised representative of a financial services licensee” in section 944A of the Corporations Act.

While we have contacted ASIC to try and understand this change in position, we think firms should proceed to rely on ASIC’s updated guidance given the enormous burden this removes for firms. It’s disappointing this clarification was not provided earlier!

When will foundation SOAs still be required?

Under the new guidance, there are two key scenarios when a foundation SOA will be required:

  • if you are moving from an AR model to be an employee representative; and
  • if the providing entity is an individual AR and the client moves to another adviser who is either an AR or employee representative.

A foundation SOA will not be required under an AR model, where the individual AR and CAR remain the same (but the licensee is swapped out. However, client consents still need to be obtained for the new licensee (TFN, privacy, receiving documents electronically etc).