Government Confirms New Financial Adviser Disciplinary System

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The Government has announced it is accelerating the establishment of a new disciplinary system and single disciplinary body for financial advisers, as recommended by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

AFA CEO, Philip Kewin …Code Monitoring Australia has withdrawn its application

The new body is set to be established in early 2021, subject to the passage of legislation which will be introduced into the Parliament next year.

The Government stated the ‘long term sustainable solution’ will take the place of code monitoring bodies due to be established by industry associations, which included the AFA and FPA, under professional standards reforms (see: Joint Code Monitoring Proposition…).

Financial advisers will be expected to meet the Code of Ethics’ standards from 1 January 2020, from which it will be applied by law.

Australian Financial Services Licensees will also be required to take reasonable steps to ensure their representatives comply with the code, and if they do not then ASIC will be able to take action against those licensees.

It also said the regulator is considering the steps it needs to take to ensure that licensees do not breach the law by not registering advisers with a code monitoring body and will provide an update shortly.

“Restoring trust in Australia’s financial system is part of our plan for a stronger economy.”

The Government thanked the professional associations and the time and resources that had been undertaken towards implementing code monitoring by the end of 2019.

“Treasury will immediately begin engaging with these associations, consumer representatives and other stakeholders to consult on the new system,” it stated.

“Roundtables will be held later this year to consider policy design and how to best transition to the new system,” it added, confirming that these changes will not impact clients who seek access to redress through the Australian Financial Complaints Authority.

“Restoring trust in Australia’s financial system is part of our plan for a stronger economy,” it stated.

Responding to the announcement, the Association of Financial Advisers Chief Executive, Philip Kewin, says the joint bodies representing Code Monitoring Australia have decided to withdraw CMA’s application, despite satisfying ASIC’s requirements and receiving in-principle approval.

“Given the Government’s intent to introduce the single body in such a short timeframe, we felt it was important to avoid uncertainty and unnecessary duplication of costs,” Kewin explained.

“Financial advisers and their clients have been subjected to enormous demands and uncertainty. We need to avoid adding complexity, further duplication and cost to the regulation of financial advice.”

“We need to avoid adding complexity, further duplication and cost to the regulation of financial advice.”

He noted that the AFA aims to work closely with the Government during the consultation and design process that will run into 2020.

In a joint response on behalf of Code Monitoring Australia, the heads of the six associations for financial advisers expressed disappointment in the timing of the Government’s decision to not proceed with code monitoring, particularly as there is one month until all financial advisers are due to have registered.

The associations said: “Given the work that has been undertaken and costs incurred in good faith, we are disappointed that Code Monitoring Australia won’t proceed. We offered an effective disciplinary model which met ASIC’s requirements and was ready to go on 1 January 2020.

“We are committed to ensuring that appropriate disciplinary procedures and consumer protections are in place, but are disappointed that the announcement is so late in the development process.

However, they added: “We remain committed to working with the Government to ensure the enforcement of the FASEA Code of Ethics, which protects consumers and promotes high standards among financial advisers.”

Banking Royal Commission Recommendation 2.10, on which the Government has shaped its decision regarding the establishment of a central disciplinary body for financial advisers…


1 COMMENT

  1. If anyone from overseas unfamiliar with the financial advice industry read the above, they would come to the conclusion that all financial advisers must all be a bunch of rogues or cowboys. To me it seems like the only conclusion to the banking Royal Commission was an attack on financial advisers, who by and large were shrinking violets compared to the conduct of the banks. Again the banks slip through the cracks, and the clients suffer by paying more for insurance and lumbered with the burden of compliance. We must fight back and the role has to be played by all of us and our industry associations. AFA, FPA AIOFP and all our industry associations must form one voice via an intensive media advertising campaign blitz, setting out the real fact and the benefits we bring to society. Call the campaign, My Trust My Adviser. All mine!

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