FAE · ASIC Financial Adviser Exam
Lesson 3 of 3 in Advice and disclosure: FSG, SOA, PDS and warnings
When a Product Disclosure Statement must be given and by whom, what it contains, the rules on advertising, the 14-day cooling-off right, and the ban on offering products through unsolicited real-time contact.
Financial advice regulatory and legal obligations10 min read9 sections
Checked against: Corporations Act 2001 (Cth), compilation No. 149 (19 Sep 2026): ss761A (risk insurance product), 764A(1)(d)-(e), 946C(3), 949A(2), 992A, 992AA, 1011B, 1012A-1012D, 1013C, 1013D, 1018A, 1019A, 1019B, 1019D, 1021B-1021E, 1022B, 1041H; endnotes (ss992A, 992AA substituted by Act No. 135, 2020, commenced 5 Oct 2021); Corporations Regulations 2001, compilation No. 214 (1 Sep 2026): regs 7.8.21A, 7.8.24, 7.9.64, 7.9.64A, 7.9.65, 7.9.67; ASIC RG 38 The hawking prohibition (issued Sept 2021, updated March 2024): RG 38.20, 38.42-38.45, 38.51, 38.56, 38.64-38.65; Financial Planners and Advisers Code of Ethics 2019, Standard 5; ASIC Financial adviser exam: Exam preparation guidance v6.0 (Sept 2026).. Independent prep, not endorsed by ASIC.
ASIC's curriculum asks you to apply Chapter 7 to scenarios, identify disclosure breaches and their consequences. The reading list names Part 7.9 Divisions 2 (PDS), 3, 4 (advertising), 5 (cooling-off), 5A and 7 (enforcement), and Part 7.8 Division 8, where the hawking ban in s992A now sits (Exam preparation guidance v6.0, Sept 2026). Part 7.9 Division 5A deals with unsolicited off-market offers to buy products from holders (s1019D), not hawking.
Statutory extracts are supplied with questions. Our practice questions ask three things: was a PDS due, from whom and by when; can the client still hand the product back; and was a sales contact lawful.
Any regulated person can owe a PDS: the issuer, any AFS licensee or authorised representative, and certain sellers (s1011B).
| Situation | Trigger | Deadline | Source |
|---|---|---|---|
| Recommendation | Personal advice to a retail client recommending a product acquired by issue (or a secondary sale needing a PDS) | At or before the advice | s1012A(3) |
| Issue | Offer to issue, offer to arrange the issue, or issue where there are reasonable grounds to believe no PDS was received | At or before the offer or issue | s1012B(3) |
| Client's own offer | A retail client offers to acquire a product by issue |
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Case study FAE-C95, question 4 of 4: Alex's general advice newsletter. Alex, 47, is an authorised representative of Southgate Wealth, an AFS licensee, and works in a small practice in Adelaide with about 300 clients. Each month he emails a newsletter to 2,000 subscribers, most of whom are not his clients; anyone can subscribe through his website. Southgate's compliance team does not review the newsletter before it is sent. This month's edition says: 'With rates falling, now is the time to move from term deposits into the Coastal Income Fund. I've moved my own mother's savings there.' It includes a link to apply online and a footnote saying the newsletter is 'general information only'. The Coastal Income Fund is an unlisted registered managed investment scheme that lends to property developers and targets income of 7% a year. The newsletter does not mention the fund's risks or that it is not a bank deposit. Southgate receives a distribution fee from the fund's issuer, Coastal, for each new investor who applies through the link. Within a week several subscribers who are retirees have invested, some moving most of their term deposits. Two days after the edition, Joan, 72, a widowed retiree who reads the newsletter, rings Alex. She has A$300,000 in term deposits, lives on the interest, and asks whether she should move it all into Coastal. Alex replies, 'Yes, move the lot, like I did for Mum.' Alex's reply is BEST described as…
| Before the client is bound |
| s1012B(4) |
| Sale | Off-market sale by a controller of the issuer, or a sale within 12 months that amounts to an indirect issue | At or before the offer | s1012C(3), (5)-(8) |
General advice does not trigger s1012A, which needs personal advice. Its warning instead tells the client to obtain and consider the PDS (s949A(2)(c)).
The main exceptions are in s1012D:
Content follows s1013D(1): issuer details, significant benefits and risks, costs, commissions that affect returns, other significant features, dispute resolution, general tax implications, any cooling-off regime, and, for investment products, labour, environmental, social or ethical considerations. Amounts appear in dollars unless the regulations allow otherwise, and the PDS must be clear, concise and effective (ss1013D(1)(m), 1013C(3)).
Handing over a PDS is disclosure, not understanding. Code of Ethics Standard 5 requires you to be satisfied, on reasonable grounds, that the client understands the benefits, costs and risks of products you recommend.
Answer: A. personal advice: Alex must meet the best interests duty and give Joan an SOA
Answer: Personal advice: Alex must meet the best interests duty and give Joan an SOA. Joan told Alex her age, savings and need for income, and he answered her question on those facts.Why not the others:• general advice: it repeats the newsletter, so the newsletter's warning covers it: the words repeat the newsletter, but a reply to Joan's own facts is new, personal advice.• personal advice, but no SOA is needed when the client initiates the call: who starts the call does not decide whether an SOA is needed.• general advice: Alex did not complete a fact find or charge Joan a fee: a missing fact find or fee does not make advice general; it only shows the process was skipped.Watch out: Alex must also give the fund's PDS at or before the recommendation (s1012A(3)), and moving all of a retiree's income savings into one unlisted fund raises serious s961G concerns.Rule: Advice is personal if the provider considered, or a reasonable person might expect him to have considered, one or more of the client's objectives, financial situation and needs (s766B(3)); it brings the best interests duty (s961B) and an SOA (s946A).Source: Corporations Act 2001 (Cth) ss766B, 946A, 961B, 961G, 1012A (compilation No. 149, 19 Sep 2026)
Case study FAE-C32, question 4 of 4: The super fund webinar. Banksia Super's trustee holds an AFS licence and offers members advice through a team of salaried advisers. It runs a free 90-minute online webinar, 'Getting ready to retire', for members aged 50 to 60, and about 400 members attend. The presenter, Andrew, 45, is one of Banksia's employed advisers and a relevant provider. His slides explain the rules for transition-to-retirement (TTR) income streams and salary sacrifice, and one slide states 'Banksia's Balanced option has returned 7.2% a year over 10 years'. The slides carry no other information about risk or returns. In the question-and-answer chat, which every attendee can read, a member, Gwen, types: 'I'm 58, salary $90k, balance $340k. Should I start a TTR and salary sacrifice the difference?' Andrew replies in the chat: 'Sounds like it would work well for you, Gwen.' Another member asks whether to switch from Balanced to High Growth. Andrew answers the whole webinar: 'High Growth has done better over 10 years, so most people your age should probably consider it.' Banksia records the webinar and posts the recording on its member website the next day. A month later a member complains to Banksia that she moved to High Growth after Andrew's comment and the 10-year returns slide, then lost 9% in a market fall. Which concern about the slide and the comment is MOST relevant?
Answer: D. Past returns alone can mislead, so risk and context must also be explained
Answer: Past returns alone can mislead, so risk and context must also be explained. Presenting past returns without balancing information about risk, and without saying that past performance is not a reliable guide to future returns, can create a misleading impression.Why not the others:• The comment needed a general advice warning; with one, the past return figures…: A general advice warning was needed, but a warning does not cure a misleading impression about returns.• Andrew had to give attendees the High Growth PDS…: The general advice warning tells members to obtain and consider the PDS; it does not require handing it out during the webinar.• The comment was personal advice to the member who asked, who needed an SOA…: Andrew answered with a statement about 'most people your age', considering no one's circumstances, so it was general advice and no SOA followed.Watch out: The member's complaint should go through Banksia's internal dispute resolution process.Rule: Misleading conduct about financial services is prohibited, and ASIC's advertising guidance says past performance should be balanced, not given undue prominence, and carry a clear warning that it does not predict future returns.Source: Corporations Act 2001 (Cth) ss949A, 1041H (compilation No. 149, 19 Sep 2026); Australian Securities and Investments Commission Act 2001 (Cth) s12DA (compilation No. 108, 7 Jul 2026); ASIC RG 234 Advertising financial products and services (including credit) (issued 9 Jun 2026), RG 234.16-234.17, 234.83-234.86; ASIC RG 271 Internal dispute resolution (2 Sep 2021)
Case study FAE-C33, question 4 of 4: Reviewing the Fosters' SOA. A paraplanner at Westgate Financial, an AFS licensee, reviews a draft SOA prepared by Helen, an authorised representative and relevant provider, for Ian and Mel Foster before Helen presents it. The fact find records: Clients: Ian, 45, self-employed electrician, income A$118,000 · Mel, 45, primary school teacher, income A$96,000 Family: married, two children aged 12 and 15 Home: worth A$850,000, mortgage A$310,000 Savings: A$95,000 in a high-interest account Super: Mel A$210,000 in an industry fund · Ian A$140,000 in a retail fund Goals: retire at 62; protect Ian's income if he cannot work Risk profile: balanced Note: Ian declined to give details of a recent hospital stay. The SOA recommends rolling Mel's super into a platform, investing A$80,000 of savings in a managed account, and taking retail income protection for Ian. It states the platform fee as '0.45% p.a.' and the managed account fee as 'up to 0.9% p.a.', and records Helen's ongoing advice fee in dollars. The basis of advice section says only 'based on your risk profile'. The SOA contains no warning about incomplete information. It names Helen and the licensee but not Helen's authorised representative number. Standard 5 of the Code of Ethics says, in part: 'You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.' At the presentation meeting Mel says she skipped the fee pages because 'it's all percentages', and Ian says, 'We trust you, just show us where to sign.' Under Standard 5, Helen should FIRST…
Answer: D. explain what the fees mean in dollars for them and check that they understand
Answer: Explain what the fees mean in dollars for them and check that they understand. Standard 5 requires Helen to be satisfied, on reasonable grounds, that the Fosters understand the advice and its costs, and Mel has said she skipped the fee pages.Why not the others:• send a plain-English fee summary and implement once they return the signed authority to proceed: This skips the check, because a signature is not understanding.• ask Mel to reread the fee pages during the meeting and initial each one as read: Initials show the fees were seen, not understood, and she has already said the percentages lost her.• record in the file note that the clients chose not to review the fees in detail: A file note records the problem instead of solving it.Watch out: Ian's trust tells Helen nothing about what either of them understands.Rule: Disclosure in the SOA and PDS meets s947C, but Standard 5 asks for the client's understanding, not just documents.Source: Financial Planners and Advisers Code of Ethics 2019 (F2019L00117), Standard 5; Corporations Act 2001 (Cth) s947C (compilation No. 149, 19 Sep 2026)
