Australian financial services licensees such as new car dealers will not be penalised by regulators if their advisors fail to comply with the code of ethics.
The Australian Securities and Investments Commission says licensees won’t be in breach of the law if their financial advisers are not registered with an ASIC approved compliance scheme by January 1, 2020.
ASIC reminds the financial services sector it is the Financial Adviser Standards and Ethics Authority’s (FASEA) task to monitor the code of ethics introduced in February this year and that a new single disciplinary body will displace the role of compliance schemes in monitoring and enforcing the code.
However, AFS licensees will still be required to take “reasonable steps to ensure that their financial advisers comply with the code”.
Licensees are expected to continually assess “whether advisers are complying with the code as part of their regular, ongoing monitoring of adviser conduct” and “when it is in place, considering the decisions of the new disciplinary body and making any necessary changes to their systems and processes”.
Under the values and standards of the Financial Planners and Advisers Code of Ethics 2019, the legislation says “In a time of increasing volatility, it is in the public interest that the profession enjoy the trust and confidence of its clients and the wider community.”
“In turn, this requires that members of the profession develop the knowledge, skills and dispositions required to earn that trust,” the reforms state.
Until the disciplinary body is established, ASIC says it will “take a facilitative approach to compliance with Standards 3 and 7 of the code”.
Standard 3 says financial services licensees and their advisers “must not advise, refer or act in any other manner where you have a conflict of interest or duty”.
Standard 7 under “Quality process” says “must give free, prior and informed consent to all benefits you and your principal will receive in connection with acting for the client”.
Standard 7 also says also says licensees “may not receive any benefits, in connection with acting for a client, that derive from a third party other than your principal”, and must be satisfied fees and charges made to clients, and any subsequent benefits received in connection with acting for the client, are “fair and reasonable and represent value for money for the client”.
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