ASIC will not enforce FASEA Code of Ethics


ASIC will not enforce the FASEA Code of Ethics in the absence of a government approved compliance scheme citing it was not empowered to do so under law.

The Australian Securities and Investment Commission (ASIC) will not enforce the mandatory, industry-wide Code of Ethics introduced by the Financial Advisers Standards and Ethics Authority (FASEA), which will apply to all financial advisers from 1 January 2020.

ASIC stated it would not monitor nor enforce the compliance of individual advisers with the FASEA Code of Ethics adding 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”.

The regulator made the statement after recently taking action to exempt advice licensees from being registered with an ASIC-approved compliance scheme by 1 January 2020, after the federal government moved to establish its own single disciplinary body for financial advisers, and the withdrawal of applications from industry bodies to be registered with ASIC as an approved compliance scheme.

ASIC stated that while it will not monitor or enforce the Code, after consultation with FASEA, it “will take a facilitative approach to compliance with Standards 3 and 7 of the code until the new single disciplinary body is operational”. Standard 3 prevents advisers acting where they have a conflict of interest or duty and Standard 7 requires advice clients to give informed consent to their adviser receiving any benefits related to the advice.

The regulator added financial advisers are still required to comply with the Code from the start of 2020 and Australian financial service (AFS) licensees are still required to ensure advisers under their licence comply with the code.

As part of this compliance, ASIC highlighted that AFS licensees needed to ensure their advisers were aware of the need to comply with the code and to provide training and guidance to advisers on conduct that is consistent with the code.

Licensees will also still be required to examine the level of compliance with the code as part of their ongoing monitoring of adviser conduct and have means for advisers to raise concerns as to whether the licensee’s systems and controls may restrict their ability to comply with the code.

The regulator noted it would take into account the context under which AFS licensees operate when considering compliance with the code, including the current regulatory environment, what guidance has been provided by FASEA on the Code, and the industry’s understanding of the meaning of the code.

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