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Triple Beef Patties – the key ingredient to time critical advice – Financial Services


Providing a client with the necessary disclosures in time
critical cases can be likened to a fast-food, rush hour
drive-through order, where a customer is served up with the
“essential” beef burger patties immediately, only to be
sent a burger with “the lot” 5 days later. Because, just
as the key ingredient to any burger (apologies, non-meat eaters) is
the “beef patty”, so too is the “statement of
certain information” requirement in section 946C(2) of the Corporations Act
2001 (Cth)
(“the Act“), the hero
ingredient to any SOA.

To explain further, when a providing entity (which we assume for
the purposes of this piece, is an individual Authorised
Representative and Adviser) does not use an SOA as the means to
provide advice, the Adviser must provide the client with a
“statement of certain information” when the advice is
provided, and, as soon as practicable, provide the client with the
SOA thereafter.

What is time critical advice?

A common misconception is that the SOA must be provided within 5
days from the day the advice is given. However, there is not yet a
“time critical case” at this stage of the Adviser/client
interaction, as section 946C(1) of the Act stipulates, that
the SOA must be given to the client “as soon as
practicable” after the advice is provided. As soon as
practicable means “all things considered”, therefore, if
the advice is relatively straight forward, the SOA could be emailed
to the client the same day that the advice was given. By contrast,
more complex advice may require longer timeframes. In any case, the
SOA must be provided before the Adviser provides the client with
any “further financial service”.

To put it simply, time critical cases arise when an SOA is
forthcoming for advice already given and the client instructs the
Adviser that they immediately require a further financial service
(such as the implementation of the advice), and it is not
reasonably practicable for the Adviser to give the client an SOA
before the client’s further instructions are initiated. There
must be two connected financial services for a time critical case
to exist, where the second of the two financial services arises or
relates to the first. In a common example, the provision of advice
is the first financial service provided, and the
“implementation” of the advice (such as the acquiring of
a financial product) is the second financial service.

Prime examples of time critical cases include the need for
immediate insurance cover or a last-minute superannuation
contribution before a 30 June deadline.

What may come as a surprise is that it is not the provision of
personal advice that sets off the oven timer requiring that an SOA
be prepared within 5 days, but rather the “further
service” arising from the advice itself (e.g. the acquiring
of, or arranging for the acquisition of a financial product).

The “statement of certain information” – much the
same as a triple burger beef patty

A written SOA isn’t always the method in which advice is
delivered to the client; for example, advice can be given to a
client orally. If advice is all the client requires (e.g. the
advice is purely strategic advice), then the adviser is required to
provide the client with an SOA as soon as practicable after the
advice is provided. There is no ticking oven timer counting down
the days before such SOA must be given to the client at this point,
but that is not to say that the client can leave the Adviser’s
office empty handed after the (advice resulting) conversation ends.
The Adviser has an obligation to provide the client with a
“statement of certain information” (as it is referred to
in section 946C(2) of the Act); or what we liken to as the
“triple beef patties” in a burger with “the
lot”.

The analogy will be obvious once you see just what the certain
disclosure information requirements are, and how these disclosures
are basically the essential ingredients to any SOA.

The triple beef patties – an ingredients list

When an Adviser provides personal advice to a retail client by
any other means than through an SOA (e.g. oral advice), the client
must be provided with certain information at the time the oral
advice is provided. The required information is what is referred to
in the Act as a “statement of certain information”, but
what we refer to as the “triple beef patties”,
which consists of the following ingredients:

  1. Remuneration information that might reasonably
    be capable of influencing the Adviser (and any of the persons in section 947B(2)(d) of the Act) in relation to
    advice provided to the client;

  2. Relationships and other interests that exist
    between the Adviser (and any of the persons listed in section 947B(2)(e) of the Act) that might
    reasonably be capable of influencing the advice provided to the
    client, including certain relationships with product issuers;
    and

  3. Product replacement information which includes
    the charges, loss of benefits (and other information listed in section 947D of the Act) that result from the
    recommended product changes.

Any Adviser would recognise that the triple beef patties above
are, in fact, identical to the core ingredients of any SOA; quite
the nutritious mouthful!

Turning on the oven timer – 5 days to give an SOA

As we mention above, the timer to give an SOA in a time critical
situation starts ticking when the client instructs the Adviser of
their requirement for an associated further financial service. The
Adviser then has 5 days generally, (see section 946C(3)(d)) from providing the further
financial service to give the client an SOA. Put simply, once the
Adviser commences arranging or implementing the advice, they will
have 5 days to cook up an SOA storm!

The content of an SOA in time critical situations does not
differ from an SOA for non-urgent advice. Here is the recipe of
what all SOAs must contain:

  1. The title “Statement of Advice”

  2. A statement setting out the advice and the basis on which the
    advice was given

  3. The name and details of the providing entity

  4. The Licensee details

  5. Your Representative details

  6. A warning if advice is provided based on incomplete or
    inaccurate information

  7. And. the hero ingredient, the “triple beef patties”,
    which we have “ground” above.

An Adviser must use their judgement regarding the level of
detail required for any SOA, depending on the type of advice, as
well as other factors; similar to the judgement one would use when
sprinkling on salt and pepper “to taste”. As importantly
as one would neatly wrap up a takeaway burger, so too must an
Adviser apply the same logic with ensuring SOAs are presented in a
clear, concise, and effective manner.

What guidance does ASIC provide in relation to time critical
advice, and is it possible to get an extension to provide a time
critical advice SOA?

At the time of writing, ASIC has not released any dedicated
regulatory guide on providing time critical advice, but RG 90
provides an SOA example for scaled advice. ASIC also refer to
“the delayed provision of SoAs in time-critical cases” in
RG 175.174-175.

ASIC has previously issued relief instruments extending the
5-day period to give Advisers a longer lead time to provide their
clients an SOA. During the peak of Covid-19, ASIC extended the
5-day lead time in relation to the provision of SOAs (for Covid-19
related advice) giving Advisers up to 30 days to provide an SOA.
The relief ended on 15 October 2021. To our
knowledge, there is currently no such relief or process to apply
for extensions for time critical advice SOAs.

When should the FSG be given?

The FSG must be given as soon as practicable after it becomes
apparent that the financial service will be, or is likely to be,
provided to the client. Just as any welcoming restaurateur would
give its potential diners a menu when they express an interest in
dining, or ordering a meal, the same applies for an Adviser to
present an FSG to a client before serving up any financial
service.

There are similar provisions in the Act in relation to
FSG-related disclosures for time critical cases, as is the case for
time critical SOAs; and it doesn’t take a food connoisseur to
see that similar flavours and core ingredients exist (particularly
around remuneration and relationships) for FSG-related disclosures.
However, there are a few unique ingredients to time critical
FSG-related disclosures and, unlike an SOA, the full FSG must be
provided to the client within 5 days after being given the
essentials, not 5 days from the time that a further financial
service is provided.

The “take away” menu

An SOA is not always the means by which advice is provided. When
advice is not provided through an SOA, such as orally, the advice
must have the “triple beef patty” accompaniment. As long
as the client does not require a further financial service
immediately, and is provided with a statement of certain
information (i.e., the remuneration, relationships and product
replacement information as you would prepare for an SOA), the full
SOA burger with “the lot” can then be served at a later
date, as soon as practicably afterwards, but before any further
financial service is provided.

Remember, it’s not usually the advice itself that sets off
the 5-day turnaround for an Adviser to give a client a full SOA;
rather, it’s the associated further financial service that
arises from, or is in connection to, the advice provided. Once your
client instructs you to provide them with a further financial
service, the 5-day oven timer for you to prepare the SOA
begins.

Bon Appetit!

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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