FASEA Releases 12-Point Code of Ethics for Advisers

The Financial Adviser Standards and Ethics Authority has released the final version of its Code of Ethics standard for advisers.

The Authority says the development of its 12-point Code and resulting legislative instrument was informed through industry consultation during 2018, from which it has clarified a number of aspects, including the values underlying the Code, and amending standards around conflicts, the best interests of the client, the effects of advice on the client and adviser record-keeping.

FASEA proposes its Code of Ethics for advisers addresses the values of:

• Trustworthiness
• Competence
• Honesty
• Fairness
• Diligence

It says “All advisers must act at all times, in all cases in a manner that is demonstrably consistent with the 12 standards which will be monitored by ASIC’s approved compliance schemes.”

The 12 standards are split into four main categories, namely:

• Ethical Behaviour
• Client Care
• Quality Process
• Professional Commitment

The following list details extracts from each of the 12 Standards. Click here to access the Explanatory Statement accompanying the Financial Planners and Advisers Code of Ethics 2019, which details each of these Standards in full.

Ethical behaviour

Standard 1

This Standard requires, as an ethical duty, that you comply with your legal obligations and not seek to avoid them. This is a minimum ethical obligation.

Standard 2

This Standard requires, as an ethical duty, that you act with integrity. It also requires you to act in the best interests of each client.

Acting with integrity requires openness, honesty and frankness in all dealings with clients. These qualities underpin the trust that clients should have in you as a professional. It also requires you to keep your promises (explicit and implied) and honour the commitments you or your principal make to your clients.

Standard 3

The primary ethical duty in this Standard is that, if you have a conflict of interest or duty, you must disclose the conflict to the client and you must not act. If the client wishes, you may refer the client to another relevant provider if neither you nor your principal will receive any benefits from the referral.

Client care

Standard 4

This standard requires that you only act for a client with the client’s free, prior and informed consent.

This means that, before you start to act, you must have explained to your client, clearly and simply:

• what services will be provided; and
• the terms on which they will be provided; and
• the records that will be made of the services, and the privacy and confidentiality arrangements applicable to them.

Standard 5

This standard elaborates on the “best interest of the client” duty in Standard 2 and also ensures that you satisfy yourself that the client understands your advice and the products and services you recommend. This requires detailed engagement with and assistance to the client.

This Standard emphasises the need for advice and recommendations to be appropriate to the client’s individual circumstances (which will require you to take into account the client’s broader, long-term interests and the client’s likely future circumstances).

Standard 6

This standard expressly requires you to take into account the broad effects of the client acting on your advice. These effects are not limited to effects on the client. For example, your advice may have implications, not just for the client personally, but also for other family members of the client.

Quality process

Standard 7

This Standard requires the client’s free, prior and informed consent to all relevant remuneration arrangements for you and your principal. To meet this Standard, the client must be given a clear and simple explanation of the fees and charges, and the benefits you or your principal will receive, that are attributable to you or your principal acting for the client.

Standard 8

This Standard requires that a relevant provider keep complete and accurate records of advice and services provided.

Standard 9

This Standard requires that all financial product advice, and all financial products, offered to a client be offered in good faith. This means that you must act honestly, and in the best interest of the client, in giving the advice and making the recommendations. You will not be acting in good faith if there is something you are aware of, or ought to be aware of, that would lead to the conclusion that your advice is not in the clients’ best interests, taking into account the broad effects arising from the client acting on your advice and the broader, long-term interests and likely circumstances of the client.

Professional commitment

Standard 10

This Standard imposes, as an ethical duty, a requirement to develop and maintain a high level of relevant knowledge and skills. For example, if you specialise in a particular area, you should not provide advice outside that area unless you have the necessary skills and competencies to do so in a professional way.

Standard 11

This Standard is a positive duty to cooperate with any investigation of a breach or potential breach of this Code by a monitoring body or ASIC. This duty applies in addition to the offences in sections 921M and 921P of the Act.

Standard 12

This Standard deals with relevant providers’ professional relationships with each other, emphasising that they need to be supportive and aligned to the profession as a whole—being, and being seen to be, a profession that acts ethically and professionally.

One element of this duty affects relevant providers who are acting as supervisors for provisional relevant providers undertaking the professional year (see the Corporations (Provisional Relevant Providers Professional Year Standard) Determination 2018). This Standard requires that you must provide supervision that is in the best interest of the provisional relevant provider, that is, supervision that actively assists him or her in getting the full benefit of the professional year.