The Association of Financial Advisers (AFA) says it has reached out to the corporate regulator and Treasury to share its concerns over the interim arrangements for new fee disclosure statement (FDS) compliance.

According to the AFA, it is “simply not possible” for advisers to prepare an FDS in one day.

In the Financial Sector Reform Bill passed in February, the one-year transition period to the new FDS regime starts on July 1.

During the transition period, advisers are required to provide an FDS covering a 12-month period up to the day immediately before the day the FDS is provided.

“In essence, you would have one day to issue an FDS,” the AFA said in an advisory to its members. “This compares with 60 days to issue an FDS both before and after the reform comes into force.

“We have been very adamant that it is simply not possible to provide an FDS in one day and have equally been clear that it is inappropriate to take the risk, as any breach in terms of the content of an FDS or getting the amount wrong would result in the ongoing fee arrangement being terminated.”

AFA says it has submitted a request to the Australian Securities and Investments Commission (ASIC), urging the regulator to take a “facilitative compliance” approach during the transition year. The request was made jointly with the Financial Planning Association.

“It is important to understand that ASIC does not have the powers to provide relief,” the AFA said. “They can only take a facilitative compliance approach, where they would agree not to take any regulatory action where breaches occur.”

The AFA says a no action position or facilitative compliance approach by ASIC will not stop ongoing fee arrangements from being automatically terminated if an adviser breaches the FDS requirements

It also does not stop other parties from taking action.

“We will continue to work with ASIC and the Government on finding a workable solution,” the AFA said. “ASIC is also working on guidance for advisers, which they will release as soon as possible.”

Click here for more on the AFA advisory.