Best interest report
.docx
School
Orange County Community College, SUNY**We aren't endorsed by this school
Course
FIN 210
Subject
Management
Date
Dec 22, 2024
Pages
11
Uploaded by BarristerOstrichPerson1265
FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests DutyReport – Best Interests DutyYou are the compliance officer of a mortgage broking firm and part of your role is to: ●Identify new legislation and regulations that would affect your business●Access and interpret the changes ●Review operational procedures to reflect changes ●Communicate changes and implications of regulations to clients andcolleagues ●Implement the new operational procedures according to changesYou are to create and implement an operational procedure that reflects the MortgagePage | 1of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests Dutybroker Best Interests Duty Obligations which came into effect on 1 January 2021. You are required to access the following document (ASIC RG 273) (available inFNSFMB515 - Additional Resources) and use it to complete the report containing inthis document.If correct, you will see ‘Satisfactory’ or if incorrect you will see ‘Not Satisfactory’ inyour grades section of your learner portal next to the assessment name. Theassessor will provide feedback and a Record of Results in the assessment task oncegraded. You will be required to resubmit your work for any ‘Not Satisfactory’assessment tasks.What you need to Submit:Your completed Best Interests Duty - Report.How to Submit your Assessment:Upload your completed document into the “FNSFMK515 – Report – Best InterestsDuty assessment task [1]” in your learner portal. You can drag and drop the file intothe window or use the add file icon in the top left of the submission window andselect the file your wish to upload by using the browse/choose file option. Click on finish attempt to submit it for grading.Page | 2of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests DutyPart 1 - QuestionsQuestion 1Source the relevant documents you would need to identify the new BID regulations.The ASIC RG 273, (available in your FNSFMK515 – Additional Resources in yourlearner portal) what other sources of information you would consider to secure thenew obligations? 1.The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission)- Final Report2.Replacement Explanatory MemorandumOther sourcesRegulatory Guide 209Regulatory Guide 205Regulatory Guide 206Question 2Identify and explain in your own words the key changes brought by the new BIDObligations and why was it introduced to mortgage brokers.The new Best Interests Duty (BID) Obligations introduced important changes for mortgagebrokers to make sure they put their clients' needs first, rather than their own or anyoneelse’s. Here are the main changes and the reasons they were implemented:Acting in the Client’s Best Interests: Mortgage brokers must now legally prioritise theirclients' needs by recommending products that genuinely help them, not those that benefitthe brokers or their companies, to build trust and ensure fair advice.Preventing Conflicts of Interest: The new rules prevent brokers from recommendingproducts for personal gain unless those products are also beneficial for the client,ensuring clients get unbiased advice.Documentation of Advice: Brokers must now document their recommendations to showhow their advice benefits the client, providing transparency and accountability for bothclientsandregulators.The BID obligations were created to fix issues with biased advice in the mortgageindustry, aiming to ensure that brokers provide fair and trustworthy guidance toconsumers.Page | 3of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
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FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests DutyQuestion 3According to the RG 273 ‘Complying with the best interests duty’, identify the impactof the Best Interests Duty on the mortgage broker services. What furthersteps/processes will they need to take to comply with the new changes?Mortgage brokers must prioritise the best interests of each consumer when providingcredit assistance. This means assessing which products and services best meet theindividual needs, goals, and financial situations of each client. Brokers should avoid a “one-size-fits-all” approach, as this increases the risk of non-compliance. They need to use their judgement to determine what truly serves the client’sbest interests, even if it means challenging the client’s own views. While clients decidewhether to accept the recommendations, brokers are responsible for ensuring thoserecommendations are genuinely beneficial.To determine if a credit product is in the client’s best interest, brokers must considervarious factors holistically, weighing the value and benefits of each option. It's generallyexpected that brokers present multiple options to clients in a way that aligns with their bestinterests.Compliance with these obligations should be supported by the broker’s records, which candemonstrate adherence to the best interests duty and help ensure that credit licenseesare meeting their responsibilities.3 Steps for Brokers1. Gathering Information: Collect details about the consumer’s situation, goals, and whatthey value.2. Making an Individual Assessment: Evaluate various products to identify the best optionsfor the consumer's specific needs.3.Presenting Information and Recommendations: Provide tailored recommendationsthat reflect the consumer's circumstances, educate them for informed decision-making, and support them in applying for their chosen credit product.Page | 5of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests DutyQuestion 4Draft an internal procedure the mortgage brokers will need to follow to ensure thatthey comply with the company compliance program according to these newObligations.(Note: the procedure must include Training & Education, Process relating to the‘further steps’ outlined in question Part 3, and breach reporting process).The internal Procedure1. Education and TrainingThe mandatory two-week periodic training must be sufficient in terms of frequency,scheduling, duration, and content to guarantee that each mortgage broker is aware of thestate and federal legal requirements that are relevant to their specific BIB responsibilitiesactivities. The training will take into account the specific duties of the individual mortgagebroker as well as the nature and complexity of the mortgage broking that person engagesin.2. Further Actions must be takenEvery mortgage broker must make sure they are knowledgeable about the followingprocedures;Sep 1. Getting consumer information.This process may involve gathering information about the consumer, their goals, and thefeatures they are looking for in order to investigate their circumstances, objectives, andfinancial status.Step 2. Making an individual assessmentThis step may involve: considering a range of relevant products to identify options that areavailable to the consumer to meet their goals and objectives; and assessing what is in thatparticular consumer's best interests.Step 3. Presenting information and recommendationsThis step may involve: making recommendations that reflect the broker’s consideration ofPage | 6of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests Dutythe range of options that align with the3. Process of reporting a breachAccording to the breach reporting process, licensees must notify the compliance managerwithin two hours of learning of, or recklessly disregarding, any grounds for believing that a"reportable situation" exists. If mortgage brokers have reason to think that certainreportable circumstances have occurred in connection to other licensees, they must notifythe compliance manager. The new method may also require them to inform clients whowere impacted by a breach. In many situations, violations of basic requirements will beconsidered serious and will therefore be required to be reported, even if they are notactually material.Page | 7of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests DutyPart 2 – ReportProduce a report to communicate the new BID obligations key points to themortgage brokers and staff working in your company, and how this will affect theirclient interactions and services. You are to highlight the new internal operationalprocedure you design in question 4 to comply with these obligations. This report willbe incorporated into your business compliance policy and procedure documents foraudit, and must be written in a clear, detailed and plain language using appropriateterminology for your audience and purpose. The report is to be no longer than onepage.Report About the New ObligationsTo: Company Brokers and StaffRe: New BID ObligationsThis is to make you aware of the new BID obligations. The best interests duty requiresmortgage brokers to act in the best interests of their consumers. What is required to act in a consumer’s best interests willdepend on the individual consumer’s circumstances. Mortgage brokers are likely to needto:• Gather information about the consumer and their situation;• Use that information to assess what credit assistance would be in the consumer’s best interests; and• Depending on that assessment, potentially suggest one or more optionsto the consumer, and provide information about why the recommended option(s) are in the consumer’s best interests.In order to comply with these obligations, the following procedure will be followed:Training and education- The periodic training required is 2 weeks and must be sufficient infrequency, timing, duration, and content to ensure that the individual mortgage broker hasthe knowledge of State and Federal legal requirements that apply to the individual BIBobligations activities.Taking further steps- These include; gathering customer information, Making an individualassessment, and Breach reporting process.Regards,Gavin, Compliance Officer.Page | 8of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
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FNSFMK515 - Comply with financial services regulation and industry codes of practice (Release 1)Report – Best Interests DutyPart 3 – Convey InformationNow that all employees and mortgage brokers are up to date with the new BIDObligations and comfortable with the company organizational procedures you put inplace, you are to develop a material to convey the BID Obligations information andits meaning to all the company’s clients. The key point of this communication is toassure the clients that the company uphold high standards and will only act in theirbest interests. (Example of material you could use but not limited to: website page,template email, newsletter article, letters…)THE NEW BID OBLIGATIONSThe best interests duty- requires mortgage brokers to act in the best interests of theircustomers and show evidence of this every time they provide credit assistance. The conflict priority rule- means that you must not recommend a product or service of arelated party that would create extra revenue for yourself, your credit licensee or anotherrelated party, unless doing so would also be in the customer’s best interests.Conflicted remuneration- is a reward structure where a licensee or its representativesreceive additional perks and benefits (monetary or non-monetary) that could influence theloan products they recommend or credit advice they provide to customers.Page | 10of 11© Real Estate Academy AustraliaVersion 1.1 – January 2022RTO 32426
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