Following the Financial Adviser Standards and Ethics Authority (FASEA) Code of Ethics could prevent misconduct of the type uncovered by the Banking Royal Commission even though they aren’t subject to legal penalties, former chief executive of the body, Deen Sanders, has said.
Breaches of the Code would not be subject to criminal or civil penalties, but instead come under the remit of monitoring bodies, which would have investigative powers when it came to breaches or potential breaches.
“Institutions will instead need to increase the focus on ethics, professionalism, individual accountability, and culture to avoid breaches of the Code,” Sanders said at the SMSF National Conference this morning, arguing that “codes of ethics should be above the law, they should be aspirational”. This latter point was also made by Commissioner Kenneth Hayne.
Sanders pointed to the Code’s first standard, which requires advisers to act in accordance with the law and not try to circumvent its intent, as especially prohibitive of the misconduct heard by the Royal Commission.
“It requires that you must not seek to avoid the Code,” Sanders said. Such behaviour was rampant in the behaviour revealed before the Royal Commission, Hayne found, and Sanders said that the industry had looked at how it could get around rules rather than how it could meet them.
“Now even by having a conversation about that could prove a breach of the Code,” Sanders said.
A second theme to much of the poor conduct brought before the Royal Commission, and the subject of several recommendations, was that of conflicted advice and commission schemes.
Both Standards Two and Five of the Code could have prevented some of this misconduct, with the former preventing advisers from acting where they have a conflict of interest, and the latter requiring that all advice and financial product recommendations must be in clients’ best interests, appropriate to their circumstances, and understood by the client.
Sanders also said that the Code of Ethics’ provisions could be broadly grouped under the goals of ethical behaviour, quality process, client care, and professional commitment.