(1) The licensee must ensure that each MDA service it provides to a person as a retail client is provided under a MDA contract that:
(a) clearly specifies the nature and scope of the discretions that the licensee will be authorised to, and those that the licensee is required to, exercise and the investment strategy that is to be applied in exercising those discretions; and
(b) contains a prominent warning that identifies the key areas of difference between acquiring a financial product directly and through the MDA service and, in the case of:
(i) a contract that is entered into electronically—the part of the facility that allows the person to enter into the contract displays a prominent statement; and
(ii) otherwise—the contract requires the person entering into the contract to sign an acknowledgement;
to the effect that the person entering into the contract acknowledges the matters contained in the warning; and
(c) provides:
(i) how the contract may be terminated; and
(ii) that the client or the licensee may terminate the contract by giving a period of notice which is not more than 2 business days; and
(iii) that the contract will be terminated if ASIC notifies the licensee that it may not rely on an exemption relating to the MDA service; and
(iv) if the contract is terminated:
(A) that the licensee must not exercise any discretion in relation to the client portfolio assets but must comply with the terms of the contract as to how to deal with any client portfolio assets; and
(B) how and when the client portfolio assets will be disposed of, or transferred to the client, if those assets are not held directly by the client; and
(v) that the licensee must have and maintain written policies:
(A) setting out the steps it will take to ensure that if the contract is terminated, the client portfolio assets will be dealt with in accordance with the requirements referred to in subparagraph (iv); and
(B) that are available to the client free of charge on request.
(2) The licensee must ensure that each MDA contract obliges the licensee to:
(a) perform its obligations under the MDA contract and this section honestly and with the degree of care and diligence that a reasonable person would exercise if they were in the licensee’s position in providing the MDA service to the client; and
(b) act in the best interests of the client in performing its duties in relation to the MDA services and, if there is a conflict between the interests of the client and its own interests in performing those duties, give priority to the client’s interests; and
(c) not use information that the licensee has through providing the MDA services to gain an improper advantage for itself or any other person or to cause detriment to the client; and
(d) comply with:
(i) the investment strategy set out in the MDA contract with the client unless otherwise agreed in writing by the client; and
(ii) any representations about how it will provide MDA services that are included in a Financial Service Guide given to the client unless otherwise agreed in writing by the client; and
(e) compensate the client for any loss because of any act or omission of any agent or other person engaged in connection with the MDA service other than an act or omission of an external MDA custodian or external MDA adviser or a person acting on behalf of either, as if the acts or omissions were acts or omissions of the licensee.
(3) The licensee must comply with the provisions of the MDA contract that subparagraph (1)(c)(v) and subsection (2) require.
Note: This obligation does not affect in any way the licensee’s contractual obligation to comply with all the terms of the MDA contract, nor any remedy a client may have for any breach of the contract.
Investment Program
(4) The licensee must ensure that each MDA contract contains an identifiable part (investment program) that is entitled “Investment Program” prepared by the licensee or an external MDA adviser.
(5) The licensee must ensure that the investment program includes:
(a) an opinion from the licensee or an external MDA adviser that the MDA contract is suitable for the client’s relevant personal circumstances and the basis for that opinion; and
(b) an investment strategy containing sufficient details that a person would reasonably require for the purposes of making a decision, as a retail client, on whether the investment program is suitable for the person; and
(c) warnings that the MDA contract:
(i) may not be suitable for the client if the client has provided limited or inaccurate information relating to the client’s relevant personal circumstances; and
(ii) may cease to be suitable if the client’s relevant personal circumstances change; and
(d) if the client portfolio assets may include non-limited recourse products, the information referred to in paragraph 912AEA(1)(j).
(6) If the licensee prepares the investment program, the licensee must ensure that the investment program:
(a) is appropriate for the client; and
(b) sets out, in as much detail as a retail client would reasonably require to clearly understand:
(i) any significant risks associated with the nature and scope of the licensee’s discretions under the MDA contract and the strategies that are to be applied in exercising those discretions; and
(ii) whether and, if so, how the client may give instructions to the licensee that affect the licensee’s discretions under the MDA contract; and
(iii) details of when and by whom the suitability of the MDA contract to the client’s relevant personal circumstances will be reviewed as required by this section; and
(c) is worded and presented in a clear, concise and effective manner; and
(d) unless there is a separate Statement of Advice that meets those requirements, complies with the requirements for a Statement of Advice in Subdivisions C and D of Division 3 of Part 7.7.
(7) If an external MDA adviser prepares the investment program, the licensee must have no reason to believe that:
(a) the investment program does not comply with the requirements for a Statement of Advice in Subdivisions C and D of Division 3 of Part 7.7; or
(b) any statement in the Financial Services Guide given by the licensee about the investment program prepared by the external MDA adviser is misleading or deceptive or likely to mislead or deceive.
MDA contract and investment program review
(8) The licensee must ensure that it or an external MDA adviser gives a person personal advice about whether a MDA contract, including the investment program for the person, is suitable in light of the person’s relevant personal circumstances:
(a) before entering into the contract with the person as a retail client; and
(b) at least once every 13 months after doing so.
(9) If an external MDA adviser gives personal advice to a person before a MDA contract is entered into, the licensee:
(a) must review the Statement of Advice given in relation to the advice before entering into the contract; and
(b) must not enter into the contract if it has reason to believe that the MDA service is not appropriate to the client’s relevant personal circumstances.