ASIC treats an SMA as a managed account structure, while an SMA mandate is the investment rule set used within that structure. The distinction applies when an AFS licensee recommends, operates, or monitors a separately managed account for a client. The mandate is not the account; it defines how the account is managed.
Expanded Answer
A Separately Managed Account is an investment account or managed account service where the client’s portfolio is managed according to a model or strategy. ASIC recognises that industry terms such as SMA, IMA and MDA are not always used consistently. The regulatory classification depends on the features of the arrangement, not the label used.
An SMA mandate is the investment instruction set for that SMA. It sets the investment objective, asset universe, portfolio weights, exclusions, rebalancing rules and manager discretion. The AFS licensee and adviser assess whether the SMA and its mandate are appropriate for the client’s objectives, financial situation and needs.
Applies when: an adviser recommends a client invest through an SMA model or managed account structure.
Not the same thing: the SMA is the account or service; the SMA mandate is the investment strategy governing it.
ASIC’s MDA guidance is relevant where the arrangement gives discretion to manage client assets, because ASIC says products described as SMAs can have MDA features. ASIC also states that MDA providers need appropriate AFS licence authorisations.
Why it matters
Confusing the SMA with the SMA mandate creates advice, disclosure and supervision risk. AFS licensees must know whether they are approving a product, an investment model, a discretionary service, or all three. The wrong classification can affect licensing, documentation and monitoring obligations.
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Practical guidance
- Classify whether the arrangement is an SMA, MDA, model portfolio, or product recommendation before advice is given.
- Document the mandate’s objective, constraints, discretion and rebalancing rules in the client file.
- Review whether the AFS licensee’s authorisations, APL approval and monitoring controls match the SMA arrangement.
Further reading
SMA or MDA? That is the question