October 23, 2012
ASIC has released its much anticipated guidance paper on financial services codes of conduct. The paper includes a proposal to consider limited scope codes that exist simply to obviate the need for opt-in.
The limited scope code is one of eight proposals issued by the regulator in a consultation paper (CP 191) detailing how it will approach the approval of codes of conduct under the Future of Financial Advice (FoFA) reforms.
ASIC says it recognises that the opt-in requirement is intended to achieve specific outcomes (ie: to ensure that disengaged retail clients do not pay ongoing fees for little or no service) and therefore proposes that it will consider the approval of codes where the scope is limited to provisions that obviate the need for members to comply with the opt-in requirement.
The consultation paper also provides examples of content that may obviate the need for opt-in. ASIC said that its approach will be principally guided by the original opt-in policy objectives. These examples include:
- Allowing a longer period for clients to opt-in
- Banning ongoing asset-based or volume-based fees
- Regular communication to clients of their right to opt-out of the service
Other key proposals contained in the consultation paper include:
- The consideration of whether codes may be submitted for approval by single licensee or dealer group
- The need for code administrators to maintain a public register of subscribing members who are exempt from the opt-in requirement
- A change to the frequency of independent reviews of approved codes
- That all codes will need to be written in language that the general public can understand
- The need for administrators to notify ASIC if a person’s code membership is terminated
ASIC Commissioner, Peter Kell, invited all industry participants to engage in the consultation process.
“We encourage advisers, industry code representatives and consumer representatives to have their say, and are particularly interested in feedback about whether ASIC should modify its existing approach to defining what is a code in RG 183 for a FoFA code,” he said.
Submissions are open to the public until 3 December 2012.
Click here to view a copy of the consultation paper.