One of the key expectations from the regulatory guide is that providers of digital advice will be expected to monitor and test the algorithms which underpin their offering (and maintain evidence of testing). A record should also be kept of the purpose, scope and design of an algorithm.
Similarly, the advice that is provided to clients should be tested regularly, and providers should have in place procedures for sampling of the advice provided.
ASIC has stated that the testing should:
•8Be conducted by individuals’ suitability qualified to test compliance with the law;
• Not be a ‘tick-the-boxes’ exercise, and involve consideration of all appropriate material (even if this is outside of the digital advice provided);
• Be conducted frequently during the commencement of services, and then upon changes to the algorithm.
If the tests which occur identify breaches of the Corporations Act, or are likely to cause loss to clients, providers are expected to take steps to remedy this issue. This may involve:
•Suspending and fixing the algorithm;
•Lodging a breach report;
• Remediating clients who have suffered losses.
