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The FBAA and MFAA have both welcomed the news that ASIC will soon publish a new regulatory guide on how to comply with the incoming best interests duty.
On Thursday (11 June), the Australian Securities and Investments Commission (ASIC) released an update of the timing of its regulatory work and priorities.
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While the financial services regulator had previously announced that it had temporarily changed its regulatory work and priorities to allow it to focus on the impact of COVID-19, it has now released an update to its key outputs for the coming months.
Among these is the publication of a new regulatory guide on how it will assess compliance with the best interests duty (BID) obligations in Pt 3-5A of the National Consumer Credit Protection Act 2009. The draft guidance was published in February of this year, following recommendations from the banking royal commission.
The new BID guidance is expected to be released in “June/July 2020”, according to ASIC’s recent update, providing mortgage brokers and other relevant credit licensees with six months to prepare for its new implementation date of 1 January 2021. (The BID was originally scheduled to take effect on 1 July 2020.)
The industry has welcomed the announcement, with the Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) both applauding the news.
FBAA response
Speaking to The Adviser, the managing director of the FBAA, Peter White, commented: “Since last year, we have been lobbying hard for the implementation of BID to be pushed further out, and we were glad when this was delayed last month. Had BID implementation remained with the 1 July 2020 introduction, that would have been way too short a time frame to read, digest and understand the final guidance – especially as ASIC has still not released the final guidance. It was always going to be too tight
“With the unfortunate impact of COVID-19 in the entire marketplace, it was the appropriate decision to make to delay it.
“The regulator said last month that it was going to be released in ‘mid-2020’, so we are pleased to see that this is set to be no later than July 2020,” Mr White said.
He added that the FBAA will be releasing an industry-wide document, the 101 Best Practice Guide for Implementation of the Best Interest Duty for Business, in “late July or early August” (depending on when ASIC's final guidance is released) to help outline what the law says, the expectations set out by the new law, and how it will impact business.
“This guide will be for all brokers across industry and will overarch and complement, not replace, anything that the aggregators will be doing,” Mr White said.
The FBAA managing director added that the association would also be conducting a series of educational sessions (either webinars or physical events) to run through the 101 Best Practice Guide, and how the BID interacts with the product design and distribution obligations and responsible lending obligations.
MFAA response
Likewise, the CEO of the MFAA, Mike Felton, told The Adviser that it “welcomes the release of ASIC’s revised timetable”.
“We were pleased to learn that ASIC will soon publish a new Regulatory Guide on how compliance with the best interests duty obligations will be assessed when they commence on 1 January 2021,” Mr Felton said.
The MFAA CEO added that it was “unusual” for regulatory guidance to be published so far ahead of the commencement of obligations, so the association “sees this as a tremendous opportunity for our industry”.
“This provides the industry adequate time to deliver the required training and to develop appropriate policies and processes, and it should also allow us to implement the reforms ahead of schedule so that processes can be fine-tuned in a live environment,” he said.
Mr Felton continued: “The deferment, announced in early May, was never being treated as an excuse to delay the implementation of BID obligations, but rather an opportunity to focus on vulnerable customers and COVID-related issues during this uniquely challenging period. It also meant the industry was not at risk while the all-important regulatory guidance was being finalised.
“Although the act and the Information Memorandum outline the high-level obligations, it is the Regulatory Guide that will provide the detail on what is expected of us and how compliance will be assessed by ASIC.”
The MFAA CEO concluded: “We are confident that the implementation of a best interests duty will further differentiate the broker value proposition and drive trust and confidence with consumers – particularly among those who are yet to use a mortgage broker.”
[Related: ASIC delays BID implementation]
