REGULATORY GUIDE 146 Licensing: Training of financial product advisers July 2012 About this guide This is a guide for:  advisers (i.e. Australian financial services (AFS) licensees and representatives who provide financial product advice to retail clients); and  providers of training and education for advisers. This guide sets out minimum training standards that apply to advisers and how advisers can meet these training standards. Editor’s note: Effective 24 September 2012, Sections D and E of this paper will be under review. The review will be undertaken in consultation with industry, with a consultation paper anticipated for release in December 2012. The review will enable ASIC to explore options pending final policy positions following from Consultation Paper 153: Licensing: Assessment and professional development framework for financial advisers. REGULATORY GUIDE 146: Licensing: Training of financial product advisers About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This version was issued in July 2012 and is based on legislation and regulations as at the date of issue. Previous versions:  Superseded Regulatory Guide 146, issued 22 November 2007, reissued 20 August 2008 and 1 December 2009  Superseded Policy Statement 146, issued 28 November 2001, updated 22 January 2003 and 31 August 2005, rebadged as a regulatory guide 5 July 2007  Superseded Interim Policy Statement 146, issued 6 September 1999, updated 4 October 2000 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. © Australian Securities and Investments Commission July 2012 Page 2 REGULATORY GUIDE 146: Licensing: Training of financial product advisers Contents A Overview ................................................................................................. 4 Our approach to the training of advisers ................................................. 4 Who must meet the training standards? .................................................. 5 What are the training standards? ............................................................ 5 How do advisers meet the training standards? ....................................... 6 How are training courses and advisers assessed? ................................. 7 What are the continuing training requirements? ...................................... 8 Further information for advisers ............................................................... 8 B Who must meet the training standards? ............................................. 9 Advisers providing financial product advice ............................................. 9 Who does not have to comply with the training standards? ..................10 What should licensees do to meet their training obligations? ...............12 C What are the training standards? ......................................................15 Flexible approach ..................................................................................15 Knowledge requirements .......................................................................18 Skill requirements ..................................................................................18 Educational levels ..................................................................................20 D How do advisers meet the training standards?................................22 Approved training courses .....................................................................22 Alternative approaches to meeting the training standards ....................24 E How are training courses and advisers assessed? .........................27 Who can be an authorised assessor? ...................................................27 What is the role of an authorised assessor? .........................................29 Criteria for assessing a training course .................................................29 Evidence of meeting the training standards ..........................................30 Registering training courses ..................................................................31 Assessment of courses for basic deposit products, related non-cash payment products and FHSA deposit accounts ....................................33 F Continuing training requirements ......................................................34 Our regulatory approach ........................................................................34 Appendix A: Knowledge requirements .....................................................37 A1 Generic knowledge ......................................................................38 A2 Specialist knowledge ...................................................................39 Appendix B: Skill requirements .................................................................53 Appendix C: What criteria must a professional or industry association meet to become an authorised assessor? ...................56 Appendix D: What conditions are placed on a professional or industry association that is an authorised assessor? ....................57 Key terms .....................................................................................................58 Related information .....................................................................................62 © Australian Securities and Investments Commission July 2012 Page 3 REGULATORY GUIDE 146: Licensing: Training of financial product advisers A Overview Key points ASIC has set minimum standards for the training of financial product advisers (training standards): see RG 146.1–RG 146.3. The training standards are sets of knowledge and skill requirements that vary depending on the adviser’s activities: see RG 146.6–RG 146.7 and Section C. All natural persons who provide financial product advice to retail clients must meet the training standards, unless they fall within certain limited exemption categories: see RG 146.4–RG 146.5 and Section B. In general, advisers will meet the relevant training standards by satisfactorily completing training courses assessed as meeting the training standards by an authorised assessor and listed on the ASIC Training Register. As an alternative, experienced advisers can demonstrate their competence through individual assessment by an authorised assessor: see RG 146.8–RG 146.13 and Sections D–E. Licensees must implement policies and procedures to ensure that they and their advisers undertake continuing training: see RG 146.14–RG 146.15 and Section F. Our approach to the training of advisers RG 146.1 We have set minimum standards for the training of advisers. By setting and enforcing these training standards, we aim to: (a) protect consumers of financial advice by ensuring that those who provide the advice are competent to do so. Retail clients generally do not have the resources or expertise to assess whether their adviser has an appropriate level of competence to provide financial advice. It is important for ASIC to set training standards that ensure a level of competence; (b) help licensees comply with their legal obligations to ensure that they and their representatives are adequately trained and competent to provide the services covered by their AFS licence. Under the Corporations Act, licensees must adequately train and supervise their representatives, and must themselves be competent; and (c) help training and education providers and professional and industry associations understand our regulatory requirements, so that they can develop appropriate training courses and standards. © Australian Securities and Investments Commission July 2012 Page 4 REGULATORY GUIDE 146: Licensing: Training of financial product advisers RG 146.2 The training standards in this regulatory guide should be read with the Financial Services Training Package (FSTP). The FSTP is an integrated set of nationally endorsed competency standards, assessment guidelines and Australian Qualifications Framework qualifications for the financial services industry developed and endorsed under the National Training Framework. RG 146.3 We have set minimum training standards only and encourage industry and professional associations to build on the training standards. We recognise industry’s important role in the development and promotion of best practice relating to training and competence. Who must meet the training standards? RG 146.4 All natural persons who provide financial product advice to retail clients must meet the training standards, unless they fall within certain limited exemptions. RG 146.5 We have exempted certain persons from meeting our training standards because their activities are of a limited nature and because someone who does comply with the training standards plays a material role in the provision of financial product advice to retail clients by these persons. What are the training standards? RG 146.6 The training standards are sets of knowledge and (in some cases) skill requirements that must be satisfied, at either the Tier 1 or Tier 2 education level, by advisers before they give advice. The Tier 1 education level is broadly equivalent to the ‘Diploma’ level under the Australian Qualifications Framework and the Tier 2 education level is broadly equivalent to the ‘Certificate III’ level under the Australian Qualifications Framework. RG 146.7 The knowledge and skill requirements and educational levels vary depending on the adviser’s advice activities. That is, they vary depending on: (a) whether the adviser gives general or personal advice; and (b) what products the adviser gives advice on. The knowledge requirements are set out in Appendix A and the skill requirements are set out Appendix B. See also Table 1. © Australian Securities and Investments Commission July 2012 Page 5 REGULATORY GUIDE 146: Licensing: Training of financial product advisers How do advisers meet the training standards? RG 146.8 In general, advisers will meet the training standards by satisfactorily completing training courses listed on the ASIC Training Register relevant to their advisory activities. As an alternative, experienced advisers can demonstrate their competence through individual assessment against the training standards by an authorised assessor. RG 146.9 Persons providing advice only on basic deposit products and related non- cash payment products will be able to meet the training standards by satisfactorily completing a training course that is not on the ASIC Training Register but has instead been assessed as meeting the training standards by their licensee. RG 146.10 Table 1 summarises what individual advisers must do to meet the training standards. Table 1: What must an adviser do to meet the training standards? Adviser provides general advice Adviser provides personal advice Adviser provides advice on You must complete courses on the You must complete courses on the Tier 1 products ASIC Training Register that meet the ASIC Training Register that meet the relevant training standards, i.e. they relevant training standards, i.e. they are at the Tier 1 level and cover: are at the Tier 1 level and cover:  the generic knowledge relevant to  the generic knowledge relevant to the products you advise on and the the products you advise on and markets in which you operate (see the markets in which you operate A1 in Appendix A), and (see A1 in Appendix A),  the specialist knowledge about the  the specialist knowledge about the specific products you advise on specific products you advise on and the markets in which you and the markets in which you operate (see A2 in Appendix A) operate (see A2 in Appendix A), and OR  the relevant skills requirements You must be individually assessed (see Appendix B) by an authorised assessor against the relevant training standards OR You must be individually assessed by an authorised assessor against the relevant training standards © Australian Securities and Investments Commission July 2012 Page 6 REGULATORY GUIDE 146: Licensing: Training of financial product advisers Adviser provides general advice Adviser provides personal advice Adviser provides advice on You must complete courses on the You must complete courses on the Tier 2 products other than ASIC Training Register that meet the ASIC Training Register that meet the basic deposit products and relevant training standards, i.e. they relevant training standards, i.e. they related non-cash payment are at the Tier 2 level and cover the are at the Tier 2 level and cover: products specialist knowledge about the  the specialist knowledge about the specific products you advise on and specific products you advise on the markets in which you operate and the markets in which you (see A2 in Appendix A) operate (see A2 in Appendix A), OR and  the relevant skills requirements You must be individually assessed (see Appendix B) by an authorised assessor against the relevant training standards OR You must be individually assessed by an authorised assessor against the relevant training standards Adviser provides advice on You must complete courses on the You must complete courses on the basic deposit products and ASIC Training Register that meet the ASIC Training Register that meet the related non-cash payment relevant training standards, i.e. they relevant training standards, i.e. they products are at the Tier 2 level and cover the are at the Tier 2 level and cover: specialist knowledge about the  the specialist knowledge about the specific products you advise on and specific products you advise on the markets in which you operate and the markets in which you (see A2 in Appendix A) operate (see A2 in Appendix A), OR and  the relevant skill requirements (see You must complete courses your Appendix B) licensee has assessed as meeting the relevant training standards OR OR You must complete courses your licensee has assessed as meeting You must be individually assessed the relevant training standards by an authorised assessor against the relevant training standards OR You must be individually assessed by an authorised assessor against the relevant training standards Note 1: For definitions of ‘Tier 1 products’ and ‘Tier 2 products’, see the ‘Key terms’ section. Note 2: Advisers completing training courses on the ASIC Training Register may receive exemptions or credit for some knowledge or skill requirements: see RG 146.68–RG 146.70. How are training courses and advisers assessed? RG 146.11 In general, training courses can be listed on the ASIC Training Register if they are assessed by an authorised assessor as meeting the training standards. Licensees can assess whether training courses on basic deposit products and related non-cash payment products meet the relevant knowledge and skill requirements in the training standards. Courses assessed by licensees do not need to be listed on the ASIC Training Register. © Australian Securities and Investments Commission July 2012 Page 7 REGULATORY GUIDE 146: Licensing: Training of financial product advisers RG 146.12 Individual assessment against the training standards must be conducted by an authorised assessor. RG 146.13 The following organisations can undertake the role of authorised assessor: (a) registered training organisations (RTOs); (b) self-accrediting organisations (SAOs); or (c) a professional or industry association relevant to the financial services industry that has been accredited by us. What are the continuing training requirements? RG 146.14 Licensees must implement policies and procedures to ensure that their advisers (and they themselves, if they are natural person licensees) undertake continuing training to maintain and update the knowledge and skills that are appropriate for their activities. RG 146.15 We do not require continuing training courses to be assessed by an authorised assessor. Further information for advisers RG 146.16 For further information on what advisers must do to meet the training standards in this regulatory guide, advisers may: (a) contact the Compliance or Training Manager in their organisation responsible for the implementation of this regulatory guide; (b) contact their respective industry association; (c) search the ASIC Training Register on the ASIC website at www.asic.gov.au/fstraining; or (d) contact ASIC by visiting www.asic.gov.au/question or phoning 1300 300 630. © Australian Securities and Investments Commission July 2012 Page 8 REGULATORY GUIDE 146: Licensing: Training of financial product advisers B Who must meet the training standards? Key points All natural persons who provide financial product advice to retail clients must meet the training standards, unless they fall within certain limited exemptions: see RG 146.17. We have exempted certain persons from meeting the training standards because their activities are of a limited nature and because someone who does comply with the training standards plays a material role in the provision of financial product advice to retail clients by these persons: see RG 146.18–RG 146.29. The licensee is responsible for ensuring that all advisers meet the training standards: see RG 146.30–RG 146.35. Advisers providing financial product advice RG 146.17 All natural persons who provide financial product advice to retail clients must meet the training standards, unless they fall within one of the exemptions in RG 146.18–RG 146.29. This means that, subject to limited exemptions, the training standards must be met by: (a) natural person licensees; (b) natural person representatives of licensees; and (c) natural persons who are authorised by a corporate authorised representative of a licensee, who provide to retail clients: (d) personal advice (as defined in s766B(3) of the Corporations Act 2001 (Corporations Act)), and/or (e) general advice (as defined in s766B(4) of the Corporations Act). In this regulatory guide, we refer to persons who are required to meet the training standards as ‘advisers’. Note: For guidance on what is the provision of financial product advice, see Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36). © Australian Securities and Investments Commission July 2012 Page 9 REGULATORY GUIDE 146: Licensing: Training of financial product advisers Who does not have to comply with the training standards? Conduct not financial product advice RG 146.18 Persons that do not provide financial product advice are not required to meet the training standards. Examples of conduct that is not treated as financial product advice include: (a) conduct done in the course of work of a kind ordinarily done by clerks or cashiers (s766A(3)); (b) conduct being the provision of an exempt document or statement (s766B(1A)); and (c) certain general advice given by a financial product issuer (reg 7.1.33H). Conduct exempt from licensing RG 146.19 Persons who provide financial product advice for which there is an exemption under the Corporations Act from the obligation to hold an AFS licence are not required to meet the training standards. Examples of financial product advice that is exempt from the licensing regime include: (a) the provision of general advice in the media by product issuers (or by persons acting on behalf of product issuers) where the advice relates to the issuer’s own products and where certain warnings are provided (reg 7.6.01(1)(o)); (b) the provision of general advice to licensees by product issuers (reg 7.6.01(1)(s)); and (c) referrals that are exempt from licensing under reg 7.6.01(1)(e) or (ea). Mere preparation of advertisements RG 146.20 The training standards do not apply to persons whose conduct consists of the mere preparation of advertisements to which s1018A applies, provided that: (a) the AFS licence of the issuer or seller (as the case may be) authorises the provision of financial product advice; and (b) a responsible manager of the issuer or seller approves the advertisement before its publication or dissemination. Advice to wholesale clients RG 146.21 The training standards do not apply to the provision of advice to wholesale clients. For example, if the representative of a trustee of a pooled superannuation trust provides a financial service to a trustee of a superannuation entity that has net assets of at least $10 million or is a retirement savings account provider, then the representative does not have to meet the training requirements. Note: See s761G(6) for the meaning of retail and wholesale client. © Australian Securities and Investments Commission July 2012 Page 10