Compliance Update 11 December 2009 1

Agenda Record of Advice AML/CTF Risk Classification Process   Statement of Advice Workshop 2

RoA Updated documents released 24th November 2009 4 circumstance specific RoA documents Rebalance/Switch Additional Investment Withdrawal No Change/Hold ‘No Change File Note’ 3

RoA Why the change in structure? Confirmation of conditions of use Industry Practice Professional document Xplan 4

RoA Recap – When you can use an RoA? Must meet the following conditions: A SoA has been previously provided to the client setting out their circumstances in relation to the previous advice; The client’s circumstances in relation to the further advice is not significantly different from their circumstances from the previous advice, and  The basis of the further advice is not significantly different from the basis on which the previous advice was given. 5

RoA Recap – When you can use an RoA? Please remember that a record of advice is exactly that, it is a record of the advice provided. Speak with the client, Confirm their relevant personal circumstances, Discuss your recommendations and provide appropriate disclosures, Record the detail in the RoA as a record of your conversation. 6

RoA Main Changes Where a ‘no change’ recommendation is made, you don’t have to send a RoA to the client. For all situations where a transaction occurs, you must provide the client with the RoA (via post or email), within 1 week (five business days) of the advice. The RoA templates have a Client Acknowledgement section. We recommend, as best practice, this section be completed by the client and returned to you for your client file.   7

RoA Main changes No Change File Note Designed to quickly document a ‘no change’ recommendation outside formal reviews. File purposes only – Use RoA template if sending a copy to the client. Must still meet the requirements of using a RoA 8

RoA Do you have to use Capstone’s RoA templates? 9

AML/CTF Risk Classification Process AML/CTF Risk Classification and Checklist Please refer to handout Risk Classification Library and Guide 10

AML/CTF Risk Classification Process Frequently asked questions When are AML/CTF client identification and verification procedures are triggered? Identification and verification is only required when an adviser arranges for a client to receive a designated service from another reporting entity e.g. a product provider.    Therefore it is triggered at implementation/execution. 11

AML/CTF Risk Classification Process Frequently asked questions Are life risk products captured under the AML/CTF Act? Only a Death policy or a policy that provides payment on death with an annual premium that exceeds $1,500. 12

AML/CTF Risk Classification Process Frequently asked questions Can we make provision for AML/CTF requirements in the Client Information Questionnaire and also in Xplan? Client signs off on the Client Information Questionnaire We should not be highlighting to the client that what type of risk they are Development of the AML/CTF Client Risk Classification and Checklist. 13

AML/CTF Risk Classification Process Frequently asked questions Where you are conducting further identification/verification procedures such as sourcing of investment funds; are you required to provide additional evidence of the source, even if the funds are from a bank account? Although the financial institution may have conducted their own procedures, it should be noted that if deposited prior to the AML/CTF Act, they would not have been caught with the current processes. We encourage you to explore in more detail by asking additional questions. If a client cannot verify where the funds were initially sourced and you are not reasonably satisfied with their answers, you should immediately notify Head Office. 14

AML/CTF Risk Classification Process Frequently asked questions Can you choose not to proceed with providing a service where you have determined the client is committing an offence and is a high risk client? There are no provisions in the Act that place an obligation for you to continue or refrain from providing a service. However, it is still required that we report suspicious matters. 15

SoA/RoA Content Reminder: Using The title of ‘Statement of Advice’ or ‘Record of Advice’ Must fulfill the content requirements of the advice document Refer to February 2009 Compliance Update 16

SoA Template Review Capstone SoA template reviewed Seeking Adviser feedback 17

Question Time 18

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