The Financial Adviser Standards and Ethics Authority (FASEA) will make another attempt to clarify the operation of the conflict of interest standard within its Code of Ethics and has called on the industry to provide feedback.
In a statement released to media, FASEA said: “Based on feedback received from a range of stakeholders on standard 3 [which relates to conflict of interest] since the code was registered and more recently during the consultation process conducted on the guide, FASEA is considering amendment to the wording of Standard 3 to align the wording of the standard to its intent as explained in the guide.”
In a consultation paper also released today, the authority presented three options, stating they were based on stakeholder feedback that had previously been supported, and said it had “decided not to explore feedback that was not supported by stakeholders in previous consultation processes or not aligned with the government’s and/or FASEA’s intention”.
The first option was to incorporate FASEA’s intent into the standard by requiring advisers to “only advise, refer or act where you do not have a conflict of interest or duty, being that which could reasonably be expected to induce you to act other than in the client’s best interest”.
The second option was to reflect the findings of the financial services royal commission, which would lead to Standard 3 stating: “You must not receive any benefit (whether monetary or non-monetary), nor enter into any relationship, that could reasonably be expected to influence the advice you give or the service you provide to your client.”
Alternatively, FASEA proposed the retention of the existing wording, as the third option, which states: “You must not advise, refer or act in any other manner where you have a conflict of interest or duty.”
In putting those options forward, it stated it had reconsidered a previous draft wording of Standard 3 as prepared for the version of the code consulted on in November 2018, but rejected it as an option.
That wording stated: “You must not advise, refer or act in any manner if you would derive inappropriate personal advantage from doing so.”
The consultation paper stated: “FASEA has a settled commitment to the principle, confirmed by the findings of the Hayne royal commission, that advisers must not advise, refer or act in any other manner where they have a conflict of interest or duty.
“The former wording fails to give effect to this clear intent. Furthermore, it remains open to the original criticism, made in 2018, that it will lead to difficulty in interpretation given the inherent ambiguity in its wording.”
The consultation period on the three options will run from 3 November to 1 December and submissions will be made public at the close of the period.
