ASIC RG 175 — ASIC Regulatory Guide – RG 175 AFS licensing: Financial product advisers—Conduct and disclosure

Page 1 REGULATORY GUIDE 175 AFS licensing: Financial product advisers—Conduct and disclosure November 2024 About this guide This guide is for persons who provide financial product advice to retail clients, and their professional advisers (such as lawyers). It considers how certain conduct and disclosure obligations in Pt 7.7 and Div 2 of Pt 7.7A of the Corporations Act apply to the provision of financial product advice. Page 2 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in November 2024 and is based on legislation and regulations as at the date of issue. In December 2024 we corrected the subparagraph numbering at RG 175.89(b)(iii). Previous versions:  Superseded Regulatory Guide 175, issued May 2009, reissued April 2011, December 2012, October 2013, March 2017, November 2017 and June 2021  Superseded Policy Statement 175, issued June 2003, reissued September 2003, May 2005 and May 2007, and rebadged as a regulatory guide 5 July 2007 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 3 Contents A Overview .................................................................................................4 Disclosure obligations under Pt 7.7 .........................................................5 Conduct obligations under Div 2 of Pt 7.7A .............................................6 B Providing financial product advice ......................................................8 What is ‘financial product advice’? ..........................................................8 What obligations apply to the provision of financial product advice?.........9 Who is the ‘providing entity’? .................................................................10 Who is the ‘advice provider’? .................................................................10 Who is a ‘retail client’? ...........................................................................11 What is the difference between personal advice and general advice? ......12 The general advice warning...................................................................15 Other obligations that apply to the provision of financial product advice ......17 Failure to comply with obligations ..........................................................24 C Preparing and providing a Statement of Advice ..............................26 The obligation to prepare and provide an SOA .....................................26 SOAs and the best interests duty and related obligations .....................27 When must an SOA be provided? .........................................................27 Obligations that apply to further advice .................................................30 What must be included in an SOA? .......................................................31 Information about the advice and the basis for the advice ....................34 Information about remuneration, commission and other benefits .........35 Clear, concise and effective presentation ..............................................39 Record-keeping obligations that apply to SOAs ....................................40 Other requirements that apply to SOAs .................................................41 D Acting in the client’s best interests and related obligations ..........43 Overview ................................................................................................43 Acting in the best interests of the client .................................................47 Safe harbour for complying with the best interests duty ........................55 Providing appropriate personal advice ..................................................73 Giving a warning for advice based on incomplete or inaccurate information .............................................................................................79 Prioritising the client’s interests .............................................................80 Giving scaled advice ..............................................................................84 Record-keeping obligations that apply to personal advice ....................85 Appendix 1: Examples of the difference between personal advice and general advice ..............................................................................89 Appendix 2: Examples of financial advice reviews .................................91 Key terms .....................................................................................................94 Related information ...................................................................................101 Page 4 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 4 A Overview Key points Under Pt 7.7 of the Corporations Act 2001 (Corporations Act), providing entities that provide financial product advice to retail clients must: • prepare and provide a Financial Services Guide (FSG) or make website disclosure information available; • give a general advice warning when giving general advice; and • prepare and provide a Statement of Advice (SOA) when giving personal advice. Under Div 2 of Pt 7.7A, advice providers providing personal advice to retail clients must comply with the best interests duty and related obligations, which were introduced as part of the Government’s Future of Financial Advice (FOFA) reform package to improve the quality of financial advice received by retail clients. RG 175.1 Part 7.7 and Div 2 of Pt 7.7A of the Corporations Act require persons who provide financial product advice to retail clients to comply with certain conduct and disclosure obligations. These obligations are designed to ensure that retail clients receive good quality advice about financial products and are able to make informed decisions about that advice. The obligations vary depending on whether the advice is personal advice or general advice. Figure 1 provides an overview of these obligations. Figure 1: Overview of conduct and disclosure obligations for all persons who provide financial product advice to retail clients Note: See Table 2 and Table 3 for a text version (accessible) of the information contained in this diagram. Type of provider? Providing entity Advice provider Pt 7.7 applies: see RG 175.15 Div 2 of Pt 7.7A applies: see RG 175.18–RG 175.19 Provide a general advice warning: s949A Prepare and provide an FSG or website disclosure information: Divs 2 and 2A of Pt 7.7 Prepare and provide an SOA: s946A to 947E • Act in clients’ best interests: s961B • Provide appropriate advice: s961G • Warn if advice incomplete or inaccurate: s961H • Prioritise clients’ interests: s961J All advice General advice Personal advice Personal advice Page 5 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 5 RG 175.2 This regulatory guide tells you how we will administer the law. Providing entities and advice providers must determine and comply with their legal obligations, including those arising under Pt 7.7 and Div 2 of Pt 7.7A. Note 1: The obligations in Pt 7.7 and Div 2 of Pt 7.7A only apply where financial product advice is provided to retail clients. Note 2: In this guide, references to parts (Pts), divisions (Divs) and sections (s) are to the Corporations Act, unless otherwise specified. References to regulations (reg) are to the Corporations Regulations 2001 (Corporations Regulations), unless otherwise specified. Disclosure obligations under Pt 7.7 RG 175.3 Under Pt 7.7, providing entities must: (a) where general advice is provided, ensure that a general advice warning is given to the client; (b) prepare and provide an FSG for general and personal advice, or alternatively make the FSG information available on their website as website disclosure information (in accordance with Div 2A of Pt 7.7); and Note: This obligation applies to all providing entities that provide financial services to retail clients, not just financial product advisers. (c) where personal advice is provided, prepare and provide an SOA. Note: Part 7.7 applies to the provision of all financial services. However, this guide generally considers Pt 7.7 only in relation to the provision of financial product advice to retail clients. This guide does not generally cover:  the FSG requirements in Div 2 of Pt 7.7 (see Information Sheet 291 FAQs: FSGs and website disclosure information (INFO 291));  Pt 7.7 obligations as far as they may apply to classes of financial service other than financial product advice;  laws in detail that may be relevant to the provision of retail financial product advice, other than those in Pt 7.7 (other than Div 2) and Div 2 of Pt 7.7A;  financial product advice provided to non-retail (wholesale) clients; or  the product disclosure obligations in Pt 7.9. RG 175.4 The disclosure obligations in Pt 7.7 apply to ‘providing entities’. A providing entity may be an Australian financial services (AFS) licensee or an authorised representative: see RG 175.15. A providing entity includes a secondary service provider. Note: A secondary service provider is an AFS licensee or authorised representative who provides a financial service to a retail client via an intermediary. Page 6 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 6 Conduct obligations under Div 2 of Pt 7.7A RG 175.5 Under Div 2 of Pt 7.7A, advice providers providing personal advice must: (a) act in the best interests of the client; (b) provide the client with appropriate advice; (c) warn the client if their advice is based on incomplete or inaccurate information; and (d) where there is a conflict with their own interests, or those of one of their related parties, prioritise the interests of the client. RG 175.6 The obligations in Div 2 of Pt 7.7Acollectively referred to in this guide as the ‘best interests duty and related obligations’are designed to ensure that retail clients receive advice that meets their objectives, financial situation and needs, and that advice providers act in the best interests of their clients in providing them with advice. RG 175.7 These obligations apply to ‘advice providers’ who give personal advice to retail clients. An advice provider is generally the individual who provides the personal advice. However, if there is no individual that provides the advice, the obligations in Div 2 of Pt 7.7A apply to the legal person that provides the advice (e.g. a corporate licensee or authorised representative): see RG 175.143–RG 175.144. This may be the case if advice is provided through a computer program. Note: See Section D in Regulatory Guide 255 Providing digital financial product advice to retail clients (RG 255) for more information on how the obligations in Div 2 of Pt 7.7A apply to digital advice. RG 175.8 Table 1 provides an overview of the best interests duty and related obligations that apply to advice providers when giving personal advice to retail clients. Table 1: Overview of best interests duty and related obligations Obligation Summary Location of guidance Best interests duty: s961B(1) An advice provider must act in the best interests of the client in relation to the advice they provide to the client. RG 175.162– RG 175.184 Safe harbour for complying with the best interests duty: s961B(2) Section 961B(2) provides a ‘safe harbour’ that advice providers may rely on to prove they have complied with the best interests duty. If an advice provider shows they have taken the steps in s961B(2), they have met their obligation to act in the best interests of their client. RG 175.185– RG 175.278 Providing appropriate advice: s961G Advice providers must only provide advice if it is reasonable to conclude that the advice is appropriate for the client, assuming the best interests duty has been complied with. RG 175.279– RG 175.302 Page 7 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 7 Obligation Summary Location of guidance Warning the client if advice is based on incomplete or inaccurate information: s961H Where personal advice is based on incomplete or inaccurate information, an advice provider must warn the client that this is the case. RG 175.303– RG 175.306 Prioritising the interests of the client: s961J When providing clients with advice, advice providers must place the interests of the client ahead of any interests they have or those of their related parties. Note: The relevant related parties are listed at RG 175.307. RG 175.307– RG 175.328 Page 8 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 8 B Providing financial product advice Key points This section considers: • the meaning of ‘financial product advice’ (see RG 175.9–RG 175.12); • the key obligations that apply to the provision of financial product advice to retail clients (see RG 175.13–RG 175.14, Table 2 and Table 3); • the meaning of ‘providing entity’ and ‘advice provider’ (see RG 175.15 and RG 175.18–RG 175.19); • the meaning of ‘retail client’ (see RG 175.23 and Table 4); • the difference between personal advice and general advice (see RG 175.24–RG 175.35); • the general advice warning required under s949A (see RG 175.36– RG 175.44); • other obligations that may apply to the provision of financial product advice (see RG 175.45–RG 175.74); and • what can happen if a person fails to comply with their obligations (see RG 175.75–RG 175.78). What is ‘financial product advice’? RG 175.9 A recommendation or a statement of opinion, or a report of either of those things, constitutes financial product advice if: (a) it is, or could reasonably be regarded as being, intended to influence a person or persons in making a decision about a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products (s766B); and (b) it is not exempted from being a financial service (e.g. where reg 7.1.29 applies). Note: For a discussion of the meaning of financial product advice, see Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36). RG 175.10 Under the Corporations Act, all financial product advice is either ‘personal advice’ or ‘general advice’. RG 175.11 Personal advice is financial product advice given or directed to a person (including by electronic means) in circumstances where: (a) the person giving or directing the advice has considered one or more of the client’s objectives, financial situation and needs (other than for the purposes of complying with the Anti-Money Laundering and Counter- Terrorism Financing Act 2006, or regulations or rules under that Act); or Page 9 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 9 (b) a reasonable person might expect the person giving or directing the advice to have considered one or more of these matters (s766B(3)). RG 175.12 All other financial product advice is general advice: see s766B(4). See RG 175.24–RG 175.35 for further explanation about the difference between personal advice and general advice. What obligations apply to the provision of financial product advice? RG 175.13 If a person carries on a business of providing financial product advice, they are providing a financial service under the Corporations Act and, unless an exemption applies, they must hold an AFS licence or act as the representative of an AFS licensee: see RG 36. They must also comply with their obligations as a licensee or authorised representative. RG 175.14 Persons who provide financial product advice to retail clients must also comply with certain conduct and disclosure obligations under Pt 7.7 and Div 2 of Pt 7.7A: see Table 2 and Table 3. Table 2: Conduct and disclosure obligations for providing entities under Pt 7.7 Key obligations Type of advice the obligations apply to Ensure that a general advice warning is given to the client (s949A): see RG 175.36–RG 175.44 General advice Prepare and provide an FSG (Div 2 of Pt 7.7) and/or, where applicable, make website disclosure information available (Div 2A of Pt 7.7): see INFO 291 Personal and general advice Prepare and provide an SOA (s946A–947E): see Section C Personal advice Note: There are some exemptions from the requirements to provide an FSG (see INFO 291), give a general advice warning (see reg 7.7.20 and RG 175.44) and provide an SOA (see RG 175.89). Table 3: Conduct and disclosure obligations for advice providers under Div 2 of Pt 7.7A Key obligations Type of advice the obligations apply to Act in the client’s best interests in relation to the personal advice (s961B): see RG 175.162–RG 175.278 Personal advice Prepare and provide appropriate personal advice (s961G): see RG 175.279–RG 175.302 Personal advice Warn the client if the personal advice is based on incomplete or inaccurate information (s961H): see RG 175.303–RG 175.306 Personal advice Prioritise the client’s interests when giving advice (s961J): see RG 175.307–RG 175.328 Personal advice Page 10 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 10 Who is the ‘providing entity’? RG 175.15 The disclosure obligations in Pt 7.7 apply to ‘providing entities’. Providing entities may be AFS licensees or authorised representatives: see s949A(1)(a). Representatives that are not authorised representatives are not providing entities. Where a licensee provides financial product advice (e.g. through one of its employees), the licensee is the providing entity. Where an authorised representative provides financial product advice, the authorised representative is the providing entity. Note 1: We maintain a register of authorised representatives of AFS licensees—see the professional registers on ASIC’s website. We also maintain the financial advisers register, which lists persons who are authorised by an AFS licensee to provide personal advice to retail clients on relevant financial products (relevant providers). From 16 February 2024, relevant providers have had to be registered: see Div 8C of Pt 7.6 and Information Sheet 276 FAQs: Registration for relevant providers (INFO 276). Note 2: ‘Relevant financial products’ are financial products other than basic banking products, general insurance products, consumer credit insurance, or a combination of any of these products—see s910A. RG 175.16 Where an authorised representative is the providing entity, the authorising AFS licensee has an overriding duty to ensure that advice is provided in compliance with the law, including Pt 7.7. This is because the authorising licensee is obliged to take reasonable steps to ensure that its representatives comply with the financial services laws (as defined in s761A), which include the obligation to prepare and provide an FSG (or make available website disclosure information as and when required) and an SOA: see, in particular, s912A, 952H and 953B. Note: An AFS licensee’s obligation to take reasonable steps to ensure that its representatives comply with the financial services laws would also include complying with the best interests duty and related obligations—see s961L. RG 175.17 An AFS licensee can be subject to potential civil liability for breaches of Pt 7.7 by the authorised representative. Further, it is an offence for an AFS licensee to fail to take reasonable steps to ensure that an authorised representative complies with the representative’s obligations under Pt 7.7. This is in addition to any action that may be taken directly against the authorised representative. Who is the ‘advice provider’? RG 175.18 The conduct obligations in Div 2 of Pt 7.7A apply to ‘providers’ who we refer to as ‘advice providers’ in this guide. An advice provider is generally the individual who provides the personal advice. It may be an AFS licensee, authorised representative or other representative of an AFS licensee. Page 11 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 11 RG 175.19 However, if there is no individual that provides the advice, which may be the case if advice is provided through a computer program, the obligations in Div 2 of Pt 7.7A apply to the legal person that provides the advice (e.g. a corporate licensee or authorised representative): see s961. Note: See RG 255.88–RG 255.92 for more information on how the obligations in Div 2 of Pt 7.7A apply to digital advice. RG 175.20 AFS licensees have an obligation to ensure that their representatives provide advice in accordance with the law. A licensee could be liable for a civil penalty if it or its representatives that are not authorised representatives breach the provisions in Div 2 of Pt 7.7A. Note: An AFS licensee also has a specific obligation to take reasonable steps to ensure that its representatives comply with the best interests duty (s961B), the appropriate advice requirement (s961G), the obligation to warn the client if the advice is based on incomplete or inaccurate information (s961H), and the obligation to prioritise the interests of the client (s961J)—see s961L. A licensee could be liable for a civil penalty if it does not comply with this obligation. RG 175.21 An authorised representative could be liable for a civil penalty if it breaches the provisions in Div 2 of Pt 7.7A: see s961Q(1). In determining whether an authorised representative has engaged in conduct that breaches the provisions in Div 2 of Pt 7.7A, conduct engaged in by persons acting on their behalf may be relevant: see s769B. RG 175.22 Representatives may be subject to administrative sanctions for a breach of the obligations in Div 2 of Pt 7.7A (e.g. being banned from providing financial services for a period of time). Division 2 of Pt 7.7A does not contain criminal sanctions. Who is a ‘retail client’? RG 175.23 The meaning of ‘retail client’ depends on: (a) the type of financial product the advice relates to; and (b) the nature of the client (s761G and 761GA). Table 4 shows how this works in different situations. Table 4: The meaning of ‘retail client’ Type of financial product Who is a retail client? General insurance The person to whom the advice is provided is a retail client if the financial product to which the advice relates is prescribed under s761G(5)(b) (including regulations made for the purposes of that paragraph) and:  the client is a natural person; or  the product is or would be used in connection with a small business (s761G(5) and 761G(12)). Note: General insurance products prescribed under s761G(5)(b) are motor vehicle, home building, home contents, sickness and accident, consumer credit, travel, personal and domestic property, and medical indemnity insurance. Page 12 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 12 Type of financial product Who is a retail client? Superannuation or retirement savings account (RSA) The person to whom the advice is provided is generally a retail client unless s761G(6)(c) applies. Note: Advice to an employer about a default fund or other superannuation product is a financial service that relates ‘to a superannuation product or an RSA product’ under s761G(6)(b) and reg 7.1.28AA. As such, the service is always provided to the employer as a retail client. This is the case irrespective of the size of the employer or the value of their business assets. It does not apply if the employer is the trustee of a superannuation fund, an approved deposit fund, a pooled superannuation trust or a public sector superannuation scheme that has net assets of at least $10 million, or is an RSA provider. Other products The person to whom the advice is provided is a retail client unless:  the price for the provision of the product or the value of the product is above the prescribed amount (s761G(7)(a) and regs 7.1.18–7.1.26);  the advice is provided for use in connection with a business that is not a small business (s761G(7)(b) and 761G(12));  the client has net assets or gross income in each of the last two financial years in excess of the prescribed amounts (s761G(7)(c) and regs 7.1.28, 7.6.02AB and 7.6.02AC);  the client is a professional investor (e.g. an AFS licensee or body regulated by the Australian Prudential Regulation Authority) (s761G(7)(d) and reg 7.6.02AE); or  the advice is provided by an AFS licensee to a client where: − the licensee is satisfied on reasonable grounds that the client has previous experience in using financial services and investing in financial products that allows the client to assess the products and services, and the licensee provides a written statement to the client explaining why it is satisfied; and − the client signs a written acknowledgement that the licensee will not be treating the client as a retail client and giving them the retail disclosure documents (see s761GA). What is the difference between personal advice and general advice? Circumstances that may be relevant to whether advice is personal advice or general advice RG 175.24 As noted in RG 175.11, advice given to a person is personal advice where the person giving the advice has considered one or more of the client’s objectives, financial situation and needs, or a reasonable person might expect the person giving the advice to have considered these matters. All other financial product advice is general advice. RG 175.25 In administering the law, we will take into account all the circumstances when considering whether advice is personal advice or general advice under s766B(3)(b), including all of the following: (a) Did the person giving the advice (e.g. the financial product adviser) offer to provide personal advice (e.g. in an FSG or website disclosure information, or other material given to the client before the advice was provided)? Page 13 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 13 (b) Did the person giving the advice clearly explain whether they were providing personal advice or general advice to the client? (c) Did the client request personal advice (including requesting advice about what decision they should make)? (d) Did the person giving the advice request information about the client’s relevant circumstances? (e) Was the advice directed towards a named client or readily identifiable client or clients? (f) Does the advice contain, or was it accompanied by, a general advice warning made for the purposes of s949A? (g) Does the advice appear on its face to be tailored to the client’s relevant circumstances (e.g. does it refer to information or assumptions specific to the client)? Note 1: This is not an exhaustive list of all relevant circumstances. None of these circumstances alone determines whether advice is personal advice or general advice. The presence of any one circumstance does not necessarily mean that advice is personal advice or general advice. Note 2: While giving a general advice warning to the client is a relevant circumstance, it is not determinative and does not necessarily mean that general advice (rather than personal advice) has in fact been given to that client. Client’s relevant circumstances RG 175.26 A person giving advice need not consider all aspects of the client’s relevant circumstances (i.e. the client’s objectives, financial situation and needs) for the advice to be personal advice. It is enough that either: (a) at least one aspect of the client’s relevant circumstances was actually considered; or (b) regardless of whether they were in fact considered, a reasonable person might expect the person giving the advice to have considered at least one aspect of the client’s relevant circumstances (see s766B(3)). RG 175.27 If the person giving the advice receives or possesses information about the client’s relevant circumstances, this does not by itself mean that any advice given to that client is necessarily personal advice. This is because the test for whether financial product advice is personal advice or general advice is not dependent on whether the person giving the advice merely possesses information about the client’s relevant circumstances. RG 175.28 Whether such advice is personal advice will generally depend on whether the person giving the advice has considered (or whether a reasonable person might expect them to have considered) that information in providing the advice— for example, whether the person giving the advice has considered one or more of the client’s objectives, financial situation and needs, or whether a Page 14 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 14 reasonable person would expect them to have considered these: see s766B(3). Note: For example, if an adviser requests personal information solely for calculating the cost of the product to the client, the subsequent provision of advice to that client will not necessarily be personal advice. RG 175.29 Whether the person giving the advice has considered at least one aspect of the client’s relevant circumstances depends on what the person giving the advice actually considered (i.e. took into account) in the process of preparing and giving the advice. RG 175.30 Whether or not a reasonable person might expect the person giving the advice to have considered at least one aspect of the client’s relevant circumstances looks beyond what the person giving the advice actually considered in the process of preparing and giving the advice to what a reasonable person might expect the person giving the advice to have considered. It requires a consideration of all the circumstances around the provision of the advice, including, but not limited to, those set out in RG 175.25. RG 175.31 Advice may be personal advice where: (a) the advice is not given during a face-to-face meeting (e.g. where advice is given by telephone, in writing or by electronic means); (b) the person giving the advice has not had direct contact with the client (e.g. where the advice is based on information supplied by a third person); (c) the person giving the advice is permitted to give advice on only one financial product or on a very limited range of financial products; (d) the advice is given in a seminar; (e) the person to whom the advice is given or directed is not a natural person (e.g. where the client is a body corporate); or (f) the person giving the advice does not (subjectively) intend to provide personal advice. RG 175.32 See Table 7 in Appendix 1 for examples illustrating the differences between personal advice and general advice. RG 175.33 Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244) contains additional guidance on the differences between general advice and personal advice. RG 175.34 We will not take action against an AFS licensee, authorised representative or advice provider where personal advice is given merely because general advice is given using personal information about a client’s relevant circumstances to choose general advice that is relevant and useful to the client: see Examples A5, A6 and A7 in Table 7 in Appendix 1. Page 15 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 15 RG 175.35 This only applies if: (a) the client’s relevant circumstances are not considered when preparing the advice; and (b) it is unlikely that the client would expect the advice provided to reflect a consideration of their relevant circumstances. The general advice warning RG 175.36 Whenever general advice is provided to a retail client, s949A requires the providing entity to warn the client that: (a) the advice has been prepared without taking into account the client’s objectives, financial situation or needs; (b) the client should therefore consider the appropriateness of the advice, taking into account their own objectives, financial situation or needs, before following the advice; and (c) if the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the Product Disclosure Statement (PDS) for that product before making any decision. Conveying the substance of the warning RG 175.37 The Corporations Act does not require providing entities to use the exact wording in s949A(2) when giving general advice. What is required is that retail clients are warned about the things highlighted in RG 175.36 and that the warning is given to clients at the same time and by the same means as the advice is provided: see s949A(3). RG 175.38 In our view, providing entities will meet this obligation if they convey the substance of s949A(2) in a way that is likely to result in clients understanding that the advice should not be treated as though it were necessarily appropriate for them. Providing entities can develop their own clear wording to meet the warning requirement. For example, the following wording conveys each of the matters highlighted in s949A(2) without using the exact wording: This brochure doesn’t take into account what you currently have, or what you want and need for your financial future. It is important for you to consider these matters and read the Product Disclosure Statement (PDS) before you make an investment decision. You can get a copy of the PDS from our website at [insert URL] or by calling [insert phone number]. RG 175.39 In our view, it is good practice for providing entities to develop their own wording to make their general advice warnings more meaningful to clients. For example, providing entities could: (a) incorporate the warning messages into the substance of their general advice (rather than reciting the words of s949A(2) or including them in fine print at the end of the document); and/or Page 16 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 16 (b) consider any special communication needs of clients (e.g. age, culture, education) and develop general advice warnings that are likely to result in clients understanding the matters they are being warned about. Simpler warnings for oral general advice RG 175.40 We have granted relief to simplify the general advice warning required where oral general advice is provided to a retail client: see ASIC Corporations (General Advice Warning) Instrument 2015/540. This relief allows persons who provide general advice to give a shorter, simpler general advice warning when they provide oral general advice. RG 175.41 The simplified warning requires that a retail client be orally warned that the advice is general and may not be appropriate for the retail client. Under the relief, a warning only needs to be given once in any telephone conversation or face-to-face meeting where general advice is provided to a retail client. RG 175.42 Persons who provide general advice do not have to use the words in the legislative instrument but may develop their own words to convey this simpler warning. We consider it to be good practice for providing entities to consider the needs of their audience when deciding what words to use. RG 175.43 Some examples of simplified warnings for oral general advice include: (a) ‘This advice is general—it may not be right for you.’ (b) ‘This advice is not tailored, so you can’t assume it will be suitable for you.’ (c) ‘This advice may not be suitable for you because it is general advice.’ (d) ‘You will need to decide whether this advice meets your needs because I haven’t considered this.’ General advice in advertisements RG 175.44 Advertisements of securities and financial products must identify the issuer of the securities or products and refer potential buyers to the disclosure document or PDS: see s734 or 1018A. Provided that the advertisement also states that the client should consider whether the financial product is appropriate for them, the advertisement does not need to contain the s949A warning: see ASIC Corporations (Advertising by Product Issuers) Instrument 2015/539. The relief in this legislative instrument also conditionally exempts a licensed issuer of securities from giving an FSG, provided that the advertisement indicates that a person should consider whether the securities are appropriate for them. Note: The relief in ASIC Instrument 2015/539 is not limited to advertising through particular media or channels. Page 17 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 17 Other obligations that apply to the provision of financial product advice Corporations Act and ASIC Act provisions RG 175.45 Other sections of the Corporations Act, apart from Pt 7.7 and Div 2 of Pt 7.7A, may also apply to persons who give financial product advice, including: (a) providing entitiesthat is, the AFS licensee or authorised representative that needs to comply with the requirements in Pt 7.7 (see RG 175.15–RG 175.17); (b) advice providersthat is, the AFS licensee, authorised representative or other representative that needs to comply with the requirements in Div 2 of Pt 7.7A (see RG 175.18–RG 175.22); and (c) other entities and individuals that give financial product advice and are not a providing entity for the purposes of Pt 7.7, or an advice provider for the purposes of Div 2 of Pt 7.7A (e.g. a person who provides financial product advice but does not hold an AFS licence). RG 175.46 The other sections of the Corporations Act that may apply are: (a) Div 2 of Pt 7.10, which deals with prohibited conduct relating to the provision of financial products and financial services; (b) Div 10 of Pt 7.6, which restricts the use of certain words and expressions relating to how persons who give financial product advice represent themselves (see RG 175.49–RG 175.71); (c) Pt 7.9, which imposes obligations relating to the provision of PDSs on financial product issuers and other entities, including those who provide personal advice recommending that a client acquire financial products; (d) for AFS licensees and representatives that provide personal advice to retail clients and have an ongoing fee arrangement with their client (fee recipients), Subdiv B of Div 3 of Pt 7.7A, which deals with client consent to enter or renew an ongoing fee arrangement; Note: For guidance on ongoing fee arrangement requirements, see Information Sheet 286 FAQs: Ongoing fee arrangements and consents (INFO 286). (e) for AFS licensees and representatives that provide financial product advice to retail clients, Divs 4 and 5 of Pt 7.7A, which prohibit the licensee or representative from accepting and giving conflicted remuneration and other banned forms of remuneration; Note: See Regulatory Guide 246 Conflicted and other banned remuneration (RG 246), which explains the obligations under the provisions on conflicted remuneration and other banned forms of remuneration in Divs 4 and 5 of Pt 7.7A. (f) for relevant providers, Div 8A of Pt 7.6, which imposes obligations relating to education, training and ethical standards; and Page 18 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 18 (g) for AFS licensees and representatives that provide financial product advice to retail clients, the obligations relating to product design and distribution in Pt 7.8A. Note: See Information Sheet 264 FAQs: Design and distribution obligations for advice licensees and financial advisers (INFO 264), which explains how the design and distribution obligations for issuers and distributors of financial products in Pt 7.8A apply to advice licensees and financial advisers when providing personal advice. RG 175.47 Persons who give financial product advice must also avoid contravening the Australian Securities and Investments Commission Act 2001 (ASIC Act) when providing advice (e.g. s12DA, which prohibits misleading or deceptive conduct). RG 175.48 When financial services (including financial product advice) are provided to consumers, there is an implied warranty under the ASIC Act that: (a) the financial services will be rendered with due care and skill; and (b) if the purpose for which the financial services are being obtained is made known, the financial services will be reasonably fit for that purpose (s12ED of the ASIC Act). Use of restricted terms such as ‘independent’ RG 175.49 Section 923A of the Corporations Act restricts a person from using certain words and expressions, such as ‘independent’, ‘impartial’ and ‘unbiased’, in relation to a financial services business or in the provision of a financial service unless the following conditions are met: (a) the person (or anyone providing a financial service on their behalf or anyone on whose behalf they are providing a financial service) does not receive: (i) commissions (apart from commissions that are rebated in full); (ii) forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product; or (iii) other gifts or benefits from product issuers that may reasonably be expected to influence that person (s923A(2)(a)–(b)); (b) the person operates free from direct or indirect restrictions relating to the financial products in respect of which they provide financial services (s923A(2)(d)); and (c) the person is free from conflicts of interest that might arise from their relationships with product issuers and which might reasonably be expected to influence the person (s923A(2)(e)). Note 1: For guidance on what words or expressions are restricted terms, see RG 175.53– RG 175.58. Page 19 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 19 Note 2: Division 4 of Pt 7.7A generally prohibits an AFS licensee or its representatives that provide financial product advice to retail clients from accepting conflicted remuneration. It also prohibits employers, product issuers and sellers from giving conflicted remuneration—see RG 246. Note 3: A providing entity that would contravene s923A(1) by assuming or using the terms ‘independent’, ‘impartial’ or ‘unbiased’ in relation to the provision of personal advice to retail clients must include additional disclosure in an FSG or website disclosure information—see INFO 291. RG 175.50 The use of a restricted term includes using the word in any publication or advertisement (including on the financial services provider’s website) produced or released by a person that carries on a financial services business or provides a financial service (whether or not on behalf of another person), including AFS licensees, authorised representatives and other representatives of a licensee. Who cannot use restricted terms? RG 175.51 Where a person, who is an authorised representative of an AFS licensee, does not receive any commissions, volume-based payments or other gifts or benefits, but the licensee does, the person (who is the authorised representative) cannot use a restricted term under s923A: see s923A(2)(b)(ii). RG 175.52 Moreover, if that person’s AFS licensee does not receive commissions, volume-based payments or other gifts or benefits, but the other authorised representatives of the licensee do, that person (the authorised representative) still cannot use a restricted term: see s923A(2)(b)(iii) and reg 7.6.07. Example 1: Who cannot use a restricted term Scenario Adviser X is an authorised representative of ABC Financial Advisers, an AFS licensee. Adviser X does not receive any commissions, volume-based payments, or other gifts or benefits. ABC Financial Advisers authorises two other representatives, Adviser Y and Adviser Z, to provide advice on its behalf. ABC Financial Advisers receives commissions, and Adviser Y and Adviser Z also receive commissions. Commentary Adviser X cannot use a restricted term under s923A because ABC Financial Advisers (the AFS licensee) receives commissions. Even if ABC Financial Advisers itself does not receive commissions, Adviser X would still not be permitted to use a restricted term, because Adviser Y and Adviser Z receive commissions. What terms are restricted under s923A? RG 175.53 Section 923A(5)(a) specifies that the words ‘independent’, ‘impartial’ and ‘unbiased’ are restricted terms if a financial services provider does not Page 20 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 20 satisfy the conditions in s923A. It also provides that any other word or expression that is ‘of like import’ to ‘independent’, ‘impartial’ and ‘unbiased’ is restricted: see s923A(5)(a)(iii). RG 175.54 Furthermore, using one of these restricted terms as part of another word or an expression, or in combination with other words, is also not permitted if the conditions in s923A are not satisfied: see s923A(5)(b). For example, using the term ‘independent research’ to describe the kind of research a financial adviser does as a basis for making a recommendation to a client is not permitted under s923A if the conditions are not satisfied. RG 175.55 Words such as ‘independently owned’, ‘non-aligned’ and ‘non- institutionally owned’, and other similar words or expressions, are also restricted under s923A, and can only be used if the conditions in s923A are satisfied. This is because these words and expressions are ‘of like import’ to the words specified in s923A(5)(a). RG 175.56 We recognise that these terms are often used to convey the ownership and structure of the financial services provider, and may not be intended to assert any independence or absence of conflict or influence from a product issuer. However, the use of these terms could also imply that the financial services provider has an independent decision-making structure, free from conflicts of interest and influence from a product issuer. It is still open for these terms to mislead or confuse a consumer as to the nature of the financial services provider’s connection to the product issuer. RG 175.57 Words and expressions that refer to ownership but do not imply or suggest whether there is a relationship with a product issuer are more likely to be acceptable, although this will depend on the context in which they are used. Some examples of terms that may be acceptable under s923A, even if the conditions are not satisfied, are: (a) ‘locally owned’; (b) ‘privately owned’; and (c) ‘boutique licensee’. RG 175.58 If a financial services provider that does not satisfy the conditions in s923A wants to indicate its association with a particular industry group that uses a restricted term, the financial services provider must use very clear statements to qualify this association. The qualification should convey information about the financial services provider’s remuneration arrangements or relationships with product issuers that may give rise to a conflict of interest (e.g. the financial services provider must specify that they receive commissions) so a consumer would be in no doubt as to the financial services provider’s conflicts of interest. Page 21 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 21 Can a financial services provider that receives asset-based fees use a restricted term? RG 175.59 Financial services providers that receive asset-based fees are not prevented from using restricted terms such as ‘independent’ merely because of their receipt of asset-based fees. RG 175.60 Our position is that asset-based fees are not considered forms of remuneration calculated on the basis of the volume of business placed by the person with the issuer of a financial product: see s923A(2)(a)(ii). Asset- based fees are defined in s964F as a fee for providing financial product advice to a person as a retail client to the extent that the fee is dependent on the amount of funds used or to be used to acquire financial products by or on behalf of that person. The fee arrangement is between the client and the financial services provider. RG 175.61 In contrast, remuneration contemplated in s923A(2)(a)(ii) relates to the remuneration received by the financial services provider from the issuer of a financial product, which is calculated based on the volume of business placed by the financial services provider with the product issuer. The arrangement here is between the product issuer and the financial services provider. Does the use of an approved product list prevent a financial services provider from using a restricted term? RG 175.62 Approved product lists are commonly used by AFS licensees to provide a list of financial products for their representatives to consider when providing advice to their clients. We recognise that approved product lists are used as a risk management tool to assist a licensee in meeting the legal obligations when it or its representatives provide financial product advice. However, under s923A(2)(d), imposing an approved product list on a financial services provider could constitute a direct or indirect restriction relating to the financial products in respect of which advisers can provide advice, thereby prohibiting use of a restricted term under s923A. RG 175.63 Whether the use of an approved product list constitutes a direct or indirect restriction for the purposes of s923A(2)(d) will depend on the operation and breadth of the list. Where the approved product list is used as an open list of products, or where there is an easy process to recommend a product that is not on the list, the restriction is less likely to prevent a financial services provider from using a restricted term (assuming all the other conditions in s923A are met). Where the off-approved-product-list process is not easy for advisers to access, the approved product list is more likely to be considered a restriction and, as such, the financial services provider would not be permitted to use a restricted term. Page 22 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 22 Rebating commissions RG 175.64 A financial services provider cannot use a restricted term (such as ‘independent’ or any other similar term) under s923A unless any commissions they receive (including ‘trail’ or ‘trailing’ commissions) are rebated in full to their clients: see s923A(5)(a)(i) and 923A(2)(a)(i). RG 175.65 A commission is said to be ‘rebated in full’ if it is rebated to the client as soon as practicable but no later than three months after the commission is received. Commissions may be rebated by: (a) rebating an amount equivalent to the commission directly to the client by cash, cheque or other direct means (e.g. by direct credit to a bank account nominated by the client); or (b) offsetting any debt owed by the client (i.e. a debt owed before the commission was received by the person that gave the financial product advice) by an amount equivalent to the commission, except in circumstances where the amount of the debt is calculated by reference to commissions expected to be received by the person that gave the financial product advice. Note: A commission would not be rebated in full if the person that gave the financial product advice credits the client’s account with the amount of the commission, but the funds may be used to meet future liabilities of the client to the person that gave the financial product advice. RG 175.66 As a matter of good practice, we expect the person carrying on the financial services business or providing the financial service (whether or not on behalf of another person) to disclose that the commission will be rebated as soon as practicable but no later than three months after the commission is received. This disclosure should be made in the document that attracts the most notice. Depending on the nature of the advice or service offered, this could be an SOA, FSG or website disclosure information (where made available). Use of restricted terms such as ‘financial adviser’ and ‘financial planner’ RG 175.67 Section 923C restricts the use of the terms ‘financial adviser’ and ‘financial planner’ (and other similar terms) to ‘relevant providers’. A relevant provider is an individual that is authorised to give personal advice to retail clients on relevant financial products. Note: ‘Relevant financial products’ are products other than basic banking, general insurance and consumer credit insurance products—see s910A. Only those people who have met the professional standards in s921B(2)–(4) may be authorised to give personal advice to retail clients on relevant financial products—see s912C. To meet the professional standards, an individual must meet the qualifications standard in s921B(2), pass an exam approved by the Minister (the ‘financial adviser exam’) and undertake a professional year. Page 23 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 23 RG 175.68 In order to be a relevant provider—and therefore use the terms ‘financial adviser’ and ‘financial planner’—an existing provider must satisfy the professional standards requirements that apply at any given time. Note: An ‘existing provider’ is a person who was a relevant provider any time between 1 January 2016 and 1 January 2019 and was not banned, disqualified or subject to an enforceable undertaking under s93AA of the ASIC Act on 1 January 2019—see s1546A. RG 175.69 An existing provider cannot be authorised to provide personal advice to retail clients on relevant financial products and therefore cannot use these terms if: (a) by 1 January 2022 (or 1 October 2022 if they qualified for the extension) they failed to pass the financial adviser exam—in this case the adviser ceased to be a relevant provider from this date and cannot use the restricted terms until they satisfy the education and training requirements to be re-authorised to provide personal advice; or (b) by 1 January 2026, they have failed to meet the qualifications standard in s921B(2) and remain a relevant provider—in this case the adviser ceases to be a relevant provider from this date and cannot use the restricted terms (s921BA and s1684AA–1684D) until they satisfy the education and training requirements to be re-authorised to provide personal advice—see Quick reference guide: Applying the financial adviser professional standards. RG 175.70 Persons who give advice to wholesale clients, or who give in-house advice as an employee or director, can also use restricted terms such as ‘financial adviser’ and ‘financial planner’. However, they can only use these restricted terms when giving advice in these capacities: see s923C(3)–(6). For example, an individual who is authorised to give personal advice to wholesale clients but only general advice to retail clients (i.e. they are not a relevant provider) may use the restricted terms when advising wholesale clients, but not retail clients. Who cannot use restricted terms such as ‘financial adviser’ and ‘financial planner’? RG 175.71 A person who is not a relevant provider cannot use restricted terms such as ‘financial adviser’ and ‘financial planner’. Section 923C(1) specifically provides that the following persons cannot use restricted terms such as ‘financial adviser’ and ‘financial planner’: (a) provisional relevant providers (i.e. those undertaking their professional year); and (b) limited-service time-sharing advisers (i.e. time-share advisers that have not met the training requirements). Page 24 REGULATORY GUIDE 175: AFS licensing: Financial product advisers—Conduct and disclosure © Australian Securities and Investments Commission November 2024 Page 24 SIS Act provisions RG 175.72 Superannuation trustees are subject to obligations under the Superannuation Industry (Supervision) Act 1993 (SIS Act) when charging financial product advice fees against a member’s interest in a superannuation fund. Under the SIS Act, the trustee must: (a) charge the fees in accordance with the terms of a written consent or written request of the member (s99FA(1)(c)); (b) if the advice is provided under an ongoing fee arrangement—satisfy the applicable requirements in Div 3 of Pt 7.7A of the Corporations Act in relation to the arrangement and any deduction of ongoing fees (s99FA(1)(d)); (c) if the advice is provided under a non-ongoing fee arrangement—satisfy the requirements for the written request or consent in s99FA(2) (s99FA(1)(e)); (d) retain the written request or consent, or a copy of the consent or request (s99FA(1)(f)); and (e) not charge fees for general advice against the member’s interest (s99FA(1)(a)) or charge fees under an ongoing fee arrangement to a member’s MySuper product (s29VA(9A)). RG 175.73 In addition, superannuation trustees must meet SIS Act requirements if they charge any other member for the cost of providing financial product advice to a member: see s99F. Common law obligations RG 175.74 Persons who give financial product advice should be aware that common law obligations also apply to the provision of advice. Depending on the context in which the advice is given, these obligations may include: (a) a duty to disclose any conflicts of interest that may affect the advice they provide; Note: AFS licensees are subject to a statutory obligation to manage conflicts of interest under s912A(