The SMSF Association has used its Financial Adviser Standards and Ethics Authority (FASEA) code of ethics submission to call for less subjectivity and greater clarity to allow a more practical implementation of the required standards.
Specifically, the professional body highlighted three areas of the code of conduct with which it was particularly unhappy, the first being the obligation contained in standard two whereby an adviser should not act in a manner “where inappropriate personal advantage is derived”.
During a member webinar on addressing legislation and regulation, SMSF Association head of education and technical Peter Hogan said: “We felt there needs to be greater guidance from FASEA in relation to exactly what ‘inappropriate personal advantage’ will mean.
“Some clearer guidance in relation to a number of key areas is what we have asked for and the ‘inappropriate personal advantage’ is one we believe there needs to be some uniform and consistent direction and guidance because this is in many ways a very subjective test that may be applied here.
“And while there will be more than one code monitoring body, we certainly don’t want to find ourselves in a position where we have one particular code monitoring body applying any of these codes in a way that is different to other code monitoring bodies.”
The association also took issue with the requirement contained in standard five requiring advice to be “presented in terms easily understood by the client”.
“Again, this is very subjective as to whether something is going to be easily understood by a client or not,” Hogan said.
He pointed out having code monitoring bodies determine whether an adviser has complied with this standard will be particularly difficult given a large part of the advice process, with regard to a document such as a statement of advice, can be compliance driven within the parameters of the Corporations Act.
Standard 12 was the third element in the FASEA code of ethics causing angst for the association due to the obligation for advisers to “uphold and promote the ethical standards of the profession, and hold each other accountable for the protection of the public interest”.
According to Hogan, this obligation calls into question the exact role an adviser has to play from a macro perspective.
“Does this mean [as an adviser] you have an ethical obligation to be a whistle-blower if you become aware of perhaps advice which is not consistent with the ethical standards as they propose?” he said.
“And if you don’t become a whistle-blower, whether you will in fact then be subject to sanctions under this code of ethics with code monitoring bodies and so on.
“This is an area of great concern for us as to how this is going to operate from a practical point of view and whether this is even appropriate to have in something like these code of ethics.”
