February 5, 2023

Volume XIII, Number 36

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February 03, 2023

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February 02, 2023

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FinTech: Regulating Digital Advice in Australia

Recently, the Australian Securities and Investments Commission (ASIC) presented its views on regulating digital advice at a Financial Services Council event. The discussion provided an overview of the regulator’s priorities in this space. Below are a few key takeaways relevant to those currently providing or seeking to provide digital advice:

  1. Clear disclosure: ASIC would like to see clear disclosure in relation to the services and advice a consumer may expect to receive and express statements regarding advice that the consumer will not receive. Consumers need to be able to easily identify what advice will and will not be provided to them.

  2. Testing consumer knowledge: ASIC suggests ‘testing’ potential consumers in the following ways:

  • With respect to consumer protection – implementing methods to test consumer understanding of the scope of advice provided – that is, what advice will and will not be provided. Such protocols may alleviate any risk that a potential consumer is unaware of the scope of advice to be provided.

  • With respect to better understanding your client, implementing ‘quizzes’ to gauge the consumer’s level of knowledge regarding different products, which may be offered. This could give the digital advice provider an idea of the level of knowledge and understanding that the consumer may possess in relation to complex products.

  1. Record keeping: Companies providing digital advice should have appropriate and robust algorithm record keeping systems. Ideally, the systems in place should control, monitor, review and effectively record any changes made to the algorithms. Digital advice providers should be able to substantiate the reasons for updating the algorithm, which underpins the advice given. Some examples of possible record keeping measures relating to algorithms include automated reports which can be downloaded and provided to ASIC if requested or snap shots in time.

Copyright 2023 K & L GatesNational Law Review, Volume VI, Number 348

About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

Meera Sivanathan, KL Gates, product disclosure lawyer, investment management attorney

Ms. Sivanathan is a corporate lawyer in the Investment Management group. She is part of an experienced team that advises investment fund managers and other financial services providers on a broad range of day-to-day legal requirements such as fund establishment, product disclosure and distribution, investment management agreements, custody agreements and administration agreements.

Ms. Sivanathan also advises clients on financial services law compliance and regulation, registered scheme requirements, trustee powers and duties, and Australian...