For MDA Providers subject to the annual reporting requirements, 30 September is an important deadline. Where an MDA operates through a regulated platform, some of the ordinary reporting requirements may be satisfied differently, but important obligations remain with the MDA Provider.
At Assured Support, we like to help AFSLs stay ahead of their compliance obligations. With that in mind, we reached out to our friend Peter Turbach at MDA Guru to get his perspective on an issue MDA Providers using regulated platforms should consider as they approach the annual reporting cycle.
“There are various MDA business models to consider, whether clients own their shares directly or portfolios are controlled through a custodian. Where a custodian is involved, many MDA Providers utilise a regulated platform for administration and rely heavily on the platform’s reporting services.
With this in mind, I thought it would be useful to highlight a potential gap that can arise where an MDA Provider relies on the platform to provide its annual client reporting.”
We found this intriguing and peppered Peter with some questions, answered below.
When the platform does the reporting, what does the MDA provider still need to do?
At MDA Guru, we work with a range of AFSLs that provide Managed Discretionary Account (MDA) services through regulated platforms.
For many AFSLs, the platform arrangement works extremely well operationally. The platform maintains portfolio information, calculates valuations, records transactions and fees, and provides the client with their annual investment reporting.
It is therefore understandable that an MDA Provider may consider its annual reporting obligations largely dealt with once the platform has issued the report.
However, relying on the regulated platform’s reporting does not completely absolve the MDA Provider from its own MDA reporting obligations. The issue is more subtle and arises from the specific requirements of s912AEF of ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968.
It’s also important that “using a regulated platform” isn’t enough to qualify for the relief. The statutory relief is narrower. It requires, among other things, that all transactions are effected through instructions to a regulated platform operator and that all client portfolio assets are held through one or more regulated platforms under the relevant custodial arrangements.
What is the main issue with these arrangements?
There are two related, but separate, requirements within the MDA framework.
The first is the requirement for the MDA Provider to ensure that the client receives personal advice about whether the MDA Contract, including the Investment Program, remains suitable for the client’s relevant personal circumstances. This advice is required at least once every 13 months.
This is the substantive suitability review.
Many MDA Providers already have a well-established process for undertaking this review, commonly around the anniversary of the client’s MDA Contract.
The second requirement is annual client reporting under s912AEF.
This is where the regulated-platform model can create a compliance gap.
The platform may provide the client with the annual portfolio and transaction reporting required under the MDA framework. However, the platform will not necessarily have information concerning the MDA Provider’s own suitability advice.
For example, the platform may not know when the MDA Provider or External MDA Adviser last provided suitability advice, the basis on which that advice was given, or where the relevant Statement of Advice can be obtained.
Those matters remain connected to the MDA Provider’s advice relationship with the client.
What does s912AEF actually require?
The important provision is s912AEF(4)(d) of the Corporations Act 2001, as notionally inserted by ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968.
Where the relevant suitability Statement of Advice is not included with the annual report, the Instrument provides an alternative under s912AEF(4)(d)(ii).
The annual reporting can instead contain statements:
“(A) that a Statement of Advice which includes advice on whether the MDA contract for the person is suitable for the person’s relevant personal circumstances at a specified date from either the licensee or an external MDA adviser has been given to the person; and
(B) that a copy of the Statement of Advice is available from the licensee free of charge on request; and
(C) of the basis for the advice in the Statement of Advice.”
This wording is important.
The requirement is not simply to tell the client that their MDA has been reviewed.
Where the MDA Provider relies on this alternative reporting mechanism, the reporting must identify the date of the relevant suitability advice, confirm that the Statement of Advice is available free of charge on request, and provide a statement of the basis for that advice.
This is the part of the MDA reporting framework that can potentially be overlooked when the regulated platform is responsible for sending the annual report directly to the client.
The MDA regulatory framework expressly accommodates arrangements involving regulated platforms. However, platform involvement does not mean that every MDA-specific obligation automatically becomes the platform’s responsibility.
Does an annual report require a suitability review?
If the MDA Provider has already completed its suitability review around the client’s MDA Contract anniversary, there is no reason to duplicate that review simply because the platform’s annual report is subsequently issued.
Instead, the MDA Provider can incorporate a short MDA Annual Reporting Notification into its annual reporting process.
The notification can connect the platform’s reporting with the suitability advice that has already been provided. It can confirm that the client has previously received personal advice concerning the suitability of their MDA Contract and Investment Program, identify the date of that advice, briefly explain the basis on which the advice was provided, and advise the client that a copy of the relevant Statement of Advice is available from the MDA Provider free of charge upon request.
The communication can also remind the client to notify their adviser if there have been changes to their circumstances that could affect the suitability of their MDA.
The result is a simple division of responsibility:
The platform may perform much of the portfolio reporting, but the MDA Provider remains responsible for ensuring that the conditions of the regulated-platform relief and the MDA-specific reporting requirements are satisfied.
There is no need to reproduce the entire SOA or conduct a second suitability review.
Can the annual notification be standardised?
From an operational perspective, the solution can be considerably simpler than it might initially appear.
The MDA Provider can develop one standard annual notification for clients whose annual platform reporting is provided directly by the platform.
Most of the communication can remain identical for every client, with the client-specific information limited to the relevant date of the suitability advice and an appropriate statement describing the basis of that advice.
The statement of basis should be drawn from, and consistent with, the actual suitability advice provided to that client rather than populated using generic wording that is not supported by the advice record.
For example:
Our records confirm that you were provided with personal advice regarding the suitability of your MDA Contract and Investment Program on [DATE].
The advice considered your relevant personal circumstances, including your investment objectives, financial circumstances, investment timeframe and tolerance for investment risk, together with the objectives and parameters of your Investment Program.
A copy of the relevant Statement of Advice is available from us free of charge upon request.
The precise wording should reflect the actual basis on which the MDA Provider or External MDA Adviser conducts its suitability assessment.
A standard notification may be appropriate where the relevant suitability advice confirms that the MDA remains suitable. Where the advice identifies that the MDA Contract is not suitable, additional reporting requirements apply, and the communication should be considered separately.
Those clients should therefore be identified and removed from the standard notification workflow for individual consideration.
The important point is that the process can be systematised rather than recreated for every client each year.
How can the MDA Guru help?
At MDA Guru, we see this as a relatively straightforward compliance issue that can be addressed without adding unnecessary administration to an MDA Provider’s existing annual review process.
We can assist AFSLs to review their current MDA reporting arrangements, identify where responsibility sits between the MDA Provider and regulated platform, and develop a practical annual reporting process that addresses the requirements of the MDA Instrument.
This can include developing a standard MDA Annual Reporting Notification, establishing appropriate wording for the statement concerning the basis of the suitability advice, determining what client-specific information needs to be populated, and integrating the communication into the AFSL’s existing annual suitability-review cycle.
The objective is not to create another compliance process for the AFSL.
It is to close the gap between what the regulated platform provides and what the MDA Provider remains responsible for under the MDA framework — in a way that is simple, repeatable and capable of being applied across the MDA client book.
Our perspective
The lesson isn’t that MDA Providers should stop relying on regulated platforms. Quite the opposite. Platforms can provide significant operational efficiencies and are an important part of the modern MDA environment.
The important point is that platform reporting and MDA reporting are not necessarily the same thing. An MDA Provider can rely on the platform to deliver portfolio and transaction information to the client while still ensuring that the MDA-specific reporting requirements relating to the client’s suitability advice are addressed.
For many AFSLs, the solution may be as simple as a well-designed and properly integrated annual client notification. The objective is not to duplicate the platform’s reporting or create another annual suitability exercise, but to ensure that the MDA Provider’s own reporting obligations are properly addressed.
The platform can do the reporting, but the MDA Provider still owns the MDA compliance outcome.
At Assured Support, we encourage AFSLs using regulated platforms to review their current MDA annual reporting arrangements and confirm that the division of responsibility between the platform and the MDA Provider is clearly understood and appropriately documented.
If you are unsure whether your current MDA reporting process is meeting the applicable requirements, MDA Guru and Assured Support can help you review your compliance arrangements and identify any areas that may need attention.
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Further Reading
Frequently Asked Questions
No. Even where an MDA provider satisfies the conditions for regulated-platform relief, the relief doesn’t remove all the obligations in s912AEF.
Section 912AEF(6) provides targeted relief. Where its conditions are satisfied, paragraph 912AEF(1)(a) and 912AEF(4)(a-b) don’t apply. Those conditions include requirements concerning how transactions are effected, how client portfolio assets are held and how platform reports or electronic information are made available and reviewed.
Importantly, the provision doesn’t disapply s912AEF(4)(d). The MDA provider must therefore still address the suitability-advice component of annual reporting. Practically, an AFSL should map each reporting obligation against the platform contract and its internal processes rather than treating “the platform sends the annual statement” as evidence that the entire MDA reporting obligation has been discharged.
No. The suitability review and annual reporting are separate requirements, even though the annual reporting process may rely on information generated by the suitability review.
Under s912AEB(8), the licensee must ensure that it or an external MDA adviser gives personal advice about whether the MDA Contract, including the Investment Program, remains suitable in light of the client’s relevant personal circumstances at least once every 13 months.
Section 912AEF(4), by contrast, concerns the documents and information required as part of the annual MDA reporting process. If the required suitability advice has already been completed, the legislation does not itself require a second suitability assessment merely because the annual reporting cycle occurs later. The operational challenge is therefore one of integration: the reporting process needs reliable access to the relevant suitability-advice date, SOA and basis for the advice.
If the relevant SOA is not provided as part of the annual reporting, s912AEF(4)(d)(ii) permits an alternative, but that alternative has three substantive elements.
The reporting must state that an SOA containing suitability advice was given at a specified date, state that a copy of the SOA is available from the licensee free of charge on request, and state the basis for the advice contained in the SOA.
That last requirement is particularly important operationally. A generic statement such as “your MDA remains suitable” does not, by itself, reproduce the statutory requirement to state the basis for the advice. An AFSL using standardised annual notifications should therefore have a controlled method for extracting or accurately summarising the basis recorded in the client’s actual advice documentation, together with a check that the relevant date and SOA are correctly matched to the client.
A Responsible Manager should expect evidence of the end-to-end reporting control, not simply evidence that the platform issued a statement.
That evidence should ordinarily show which parts of s912AEF are being satisfied by the platform arrangement, that the conditions for the regulated-platform relief are actually met, how the AFSL identifies the most recent suitability advice, how the s912AEF(4)(d) information is populated, and how exceptions are handled. The Instrument also requires the licensee to retain documents given under s912AEF(4) for at least seven years.
A defensible control, therefore, connects platform reporting, advice records, and client communication into a single auditable workflow. The critical question is not “Did the annual report go out?” but “Can the AFSL demonstrate that every applicable element of its own reporting obligation was satisfied for each client?”
Yes, parts of the workflow can be automated, but automation should not substitute generic data for client-specific suitability evidence.
A standard template is operationally sensible where the required content is stable. Client name, advice date, adviser details, SOA availability wording and other structured fields can potentially be populated systematically. The higher-risk field is the statement of the basis for the suitability advice because it needs to remain consistent with the actual advice given to that client.
A good control design therefore distinguishes between stable template wording and information that must be validated against the advice record. It should also create an exception pathway where the suitability advice identifies that the MDA Contract is not suitable, because s912AEF(4)(e) imposes additional reporting requirements in those circumstances.
