What happens if I don’t issue a Fee Disclosure Statement within 60 days of the anniversary date?
Although some believe that the failure to provide a Fee Disclosure Statement (FDS) within 60 days of the anniversary date does not automatically terminate the ongoing fee arrangement, or create any obligation to refund client payments received after that date, Section 962F of the Corporations Act 2001 needs to be considered when discussing the impact of failing to provide a Fee Disclosure Statement (FDS) within 60 days of the anniversary date.
Section 962F sets out the requirements for ongoing fee arrangements, including the requirement to provide an ongoing fee disclosure statement. This statement must include the fee amount, services provided and any commissions received by the financial adviser.
If a financial adviser fails to provide the FDS within 60 days of the anniversary date, Section 962F(1A) states that the ongoing fee arrangement will be taken to have terminated on the day after the end of the 60-day period. This means that the adviser will not be entitled to any ongoing fees for services provided after this date.
However, it is important to note that the termination of the ongoing fee arrangement does not affect any other obligations or liabilities that the adviser may have under the Corporations Act or other laws. For example, the adviser may still be liable for any breach of the best interests duty or the obligation to provide appropriate advice. In addition, in the absence of an agreement (and the right to charge or retain service fees) and regardless of whether ongoing services were provided, it seems unreasonable (and contrary to the intent of the law) to suggest that any fees collected after termination can be retained by the adviser or licensee.