The drive towards automated financial services will gather pace in 2016 and here’s the next opportunity to influence the debate.
After updating its relief to better facilitate electronic delivery of mandated disclosure and the use of innovative product disclosure statements (see RG 221), ASIC has released Consultation Paper CP 249 Remaking ASIC class order on generic financial calculators together with a draft form of the revised ASIC instrument. Submissions for this consultation process close on 12 February 2016.
ASIC is seeking feedback on its proposals to remake, without significant changes, Class Order 05/1122 Relief for providers of generic calculators, which is due to expire on 1 April 2016. This is an opportunity for regulatory innovation but ASIC does not see the need for significant change. It is clear that many in the industry have a different view and the challenge is to get ASIC to understand the need for more significant changes.
Without access to the relief under the Class Order, providers of generic financial calculators may otherwise be subject to the Australian financial services licensing regime, increased conduct and disclosure obligations, as well as having to comply with the personal advice requirements under the Corporations Act.
Under the consultation paper, the changes proposed by ASIC include:
- a new requirement that the assumptions underlying the calculator must be clearly and prominently displayed but allow the provider greater flexibility about how they present information about why the assumptions are reasonable for working out the estimate—in particular, the information may be layered (i.e. detailed disclosure may be accessed through a link);
- a new requirement that if an estimate is of an amount payable or receivable at a future time of two or more years, the results must be adjusted for inflation;
- a new requirement that if a person relying on the relief becomes aware of a breach, or a likely breach, of any of the conditions in the relief, the person must lodge a written report on the matter with ASIC; and
- clarifying that although the assumptions used by a calculator may in fact reflect a particular financial product, the calculator should not refer to any particular product.
It is encouraging to see ASIC proactively engaging in consultation with industry in this ever changing landscape. With the pace of technological change and increased consumer acceptance and engagement through networked facilities, more needs to be done to facilitate the use of innovative tools and to encourage financial service providers to harness the opportunities of digitisation.
However, the proposed changes do not go far enough to facilitate the use of more innovative tools and the consultation process provides an opportunity for the financial services industry to engage with ASIC to highlight the need for additional clarification and relief in this space.
While the relief may facilitate the use of simple calculators, it does not facilitate the use of more complex algorithms with multiple underlying assumptions (that are not intended to be changed by users), the use of data or the use of risk profiling functionality as well as the ability to produce outputs that are not merely numerical.
Let’s use the consultation process to identify changes that strike a better balance between facilitating innovation (that is designed to produce better consumer outcomes) and addressing the regulator’s concerns around protecting consumers.