The Association of Financial Advisers and the Financial Planning Association have welcomed the release of ASIC’s guidance on codes of conduct. Both organisations intend submitting a code for approval, but the form of these codes remains the subject of debate.
Late last week, ASIC released guidance on the approval of codes of conduct which obviate the need for members to comply with opt-in (see: Opt-in Every Three Years Under Codes). The regulator has confirmed it will allow the submission of ‘limited scope’ codes for approval, where the contents of such codes deal only with the opt-in exemption.
Limited codes do not prevent the existence of other strong, robust, comprehensive codes that do not require ASIC approval
Recently, the AFA expressed its intention to pursue a ‘two-part code’, with only one part being subject to ASIC approval (see: AFA Considering Two-Part Code).
New AFA CEO, Brad Fox, said despite the recently released guidance, there were still a number of issues to be addressed in relation to codes, which meant the AFA would continue down the path of a two-part approach. According to Mr Fox, these issues include:
- Whether the code requirements which ‘obviate the need for opt-in’ will apply to existing clients as well as new clients, given the legislation is only applicable for new clients
- How to manage an adviser who is a member of multiple codes
- How associations can obtain access to information on potential code breaches from licensees and ASIC
“For all these reasons, the AFA is giving active consideration to a limited code, which relates only to opt-in. This limited code would be subject to ASIC approval,” Mr Fox said. “Limited codes do not prevent the existence of other strong, robust, comprehensive codes that do not require ASIC approval.”
In contrast, the FPA’s Mark Rantall said it was the view of the FPA that alternative arrangements to manage opt-in were best handled within a single, comprehensive professional code.
“The FPA Code solution to the opt-in problem removes the draconian two year termination requirement. Instead, it replaces it with a consideration of the suitability of the ongoing services to the client, judged at the initial engagement and again at a pre-agreed renewal point. Without this, we believe that clients could find themselves without financial support at a time of great need,” said Mr Rantall.
… the FPA is a strong supporter of the need for a complete Code of Professional Standards rather than just opt-in only codes
“Whilst the FPA welcomes ASIC’s update to its Regulatory Guide and the changes its proposal will make to financial planning, the FPA is a strong supporter of the need for a complete Code of Professional Standards rather than just opt-in only codes. As the professional association for financial planners, we will ultimately seek code approval by ASIC, but understand this course may be too hard for other industry associations.”
Both Associations said they would consider ASIC’s RG 183 in full before finalising their individual codes.
