November 26, 2019
In what has been welcomed as a victory for common sense, ASIC has announced it will take a facilitative approach to compliance with the controversial Standard 3 in FASEA’s proposed Adviser Code of Ethics until the Government’s new single disciplinary body becomes operational.
This announcement was made by ASIC as it outlined its approach this week to advice licensee obligations under the code.
ASIC …is specifically prevented from exercising its power to ban an adviser for breaches of the code
The regulator noted it “…will not be monitoring or enforcing individual advisers’ compliance with the Financial Planners and Advisers Code of Ethics 2019.”
The statement also clarified that under the Corporations Act 2001, “…ASIC does not have a role as a code monitoring body and is specifically prevented from exercising its power to ban an adviser for breaches of the code.”
Until the new disciplinary body is operational, the regulator stated, following consultation with FASEA, it will take what it refers to as a facilitative approach to compliance with Code Standard 3 (around conflicts of interest) and Standard 7 (remuneration arrangements) until the new single disciplinary body is operational.
Adviser association reaction has been positive, with AFA CEO, Phil Kewin positioning this development as a welcome announcement which “…recognises the challenges facing licensees and advisers in understanding and being able to practically implement the Code as it is currently written and the associated guidance.”
Meanwhile, FPA CEO, Dante DeGori, also commended this development, which he says acknowledges the new standards require significant change, and that the FPA supports a facilitative compliance approach on this matter.
ASIC has informed Riskinfo the Government is consulting on the new disciplinary system for financial advisers and the regulator’s future role in relation to the Code of Ethics will depend on the model the Government eventually implements.
…the regulator’s future role in relation to the Code of Ethics will depend on the model the Government eventually implements
ASIC stressed advisers will still be required to comply with the code from 1 January 2020 and that AFS licensees will still be required to take reasonable steps to ensure that their financial advisers comply with the code. It says those reasonable steps include:
- Making sure that their advisers are aware that they need to comply with the code from 1 January 2020 onwards
- Providing training and/or guidance to their advisers on the types of conduct that is consistent/inconsistent with the code
- Facilitating individual advisers’ ability to raise concerns with the AFS licensee about how the licensee’s systems and controls may be hindering their ability to comply with the code, and acting on those concerns where appropriate
- Considering whether advisers are complying with the code as part of their regular, ongoing monitoring of adviser conduct
- When it is in place, considering the decisions of the new disciplinary body and making any necessary changes to their systems and processes
In reiterating licensees will be required to take reasonable steps to ensure that their financial advisers comply with the code from 1 January 2020, and that advisers will still be obliged to comply with the code from that date, the regulator stated it may take enforcement action where it receives breach reports.