Fee Disclosure Statement Obligations

The Fee Disclosure Statement (FDS) obligations were introduced as part of the Future of Financial Advice (FOFA) reforms that were enacted under the Corporations Amendment (Future of Fianncial Advice Measures) Act 2012 (FOFA Act No. 1)

It became a requirement that fee recipients must provide retails clients an FDS that discloses information in relation to the previous 12 months of their ongoing fees that had been agreed upon. The definition of an ongoing fee arrangement is when a retail client is provided personal advice and subsequently charged a fee on an ongoing basis over a period of more than 12 months.

The obligations extend to both existing clients and new clients and the definitions are as follows;

Existing Client New Client

There are a number of requirements that need to be addressed when it comes to the content of the FDS, and more detail can be found on the ASIC website here.

However the important questions that need to be addressed are as follows;

  1. who must give a Fee Disclosure Statement;
  2. when does the obligation to provide an FDS arise; and
  3. what must be included in an FDS.

Please note that ASIC have adopted a number of no-action positions to help fee recipients who have made good faith attempts to comply with the FDS obligations but have been unable to contact the retail client.

Note: The no-action position by ASIC merely states ASIC’s current intention to not take regulatory action in relation to a particular state of affairs or conduct.  It does not preclude third parties from taking legal action in relation to conduct covered by the ASIC no-action position:  see RG 108, especially RG 108.33.

The requirement to provide an FDS applies to all fee recipients from 1 July 2013.

The obligation to provide a Fee Disclosure Statement is in addition to the other disclosure obligations imposed by the Corporations Act which include;

  1. providing a Financial Services Guide (FSG) under s941-973 (see RG 175 for guidance on this obliation);
  2. providing a Statement of Advice where personal advice is provided under S946-974 (see RG 175 for guidance on this obliation);
  3. complying with renewal notice and opt-in requirements under s962K-962Q
  4. conflicted remuneration and other banned remunerations in Divs 4 and 5 of Pt 7.7A (see CP 189).

Preparing an Fee Disclosure Statement