An ASIC document obtained by InvestorDaily yesterday revealed the corporate regulator does not intend to go ahead with its plans to tighten the requirements for MDA operators in April 2104, as previously announced.
Instead, ASIC will hold off until the FOFA amendments and the Financial System Inquiry (FSI) are finalised. With FSI chairman David Murray expected to release his final report in November 2014, that suggests the MDA changes could be on the backburner until 2015.
Speaking to InvestorDaily about the deferral of the changes, Crystal Wealth executive director Tim Wedd said it "makes sense" for ASIC to proceed with caution given the current environment.
"I imagine it’s more the announcement of the FSI more broadly rather than [the FOFA amendments] that is causing them to pause on the MDA side," he said – pointing to the proposed changes to MDA operator capital adequacy in particular.
In the meantime, ASIC will keep assessing new MDA licence recommendations based on the current regulatory guide and the existing class order relief, said Mr Wedd.
"I could see that in the interim you could have a few more people take up the MDA [business model] because the [regulatory] changes haven't happened," he said.
But any new players in the MDA space will have to go in "with their eyes open" given ASIC's "in principle" commitment to the changes proposed in Consultation Paper 200 Managed discretionary accounts: Update to RG 179, said Mr Wedd.
For managedaccounts.com.au chief executive David Heather, the changes can't come soon enough.
"We support ASIC’s review of the MDA space, and we are supportive of a tighter framework around MDAs," he said.
Mr Heather's firm recently underwent an extensive capital raising – partly in preparation for the expected April 2014 implementation of the regulatory changes.
"We’re done what we’ve done based on ASIC indicating it was going to be April that all this occurs. Clearly it’s not going to be April 2014, but that doesn’t change the argument that you need to be well capitalised to service this type of structure going forward," he said.
The biggest priority for managedaccounts.com.au is that there is a "level playing field" for MDA operators, said Mr Heather.
"There are many business models out there that are relying on a 'no action' letter [from ASIC], and obviously that’s not a great environment for the delivery of an MDA solution," he said.
"For all intents and purposes they’re running MDAs the same way we are, but without the impost of high professional indemnity and without annual audits," said Mr Heather.
"We’re well placed and we’re not fazed by the delay – although we would love it to be coming in sooner rather than later," he said.
