The Financial Adviser Standards and Ethics Authority (FASEA) has run into more criticism of its code of ethics guidance with complaints that it has failed to recognise the special circumstances of both stockbrokers and life risk advisers.
The Association of Financial Advisers (AFA) pointed to the failure with respect to life/risk advisers while the Stockbrokers and Financial Advisers Association (SAFAA) has strongly pointed out its deficits with respect to stockbrokers.
The SAFAA used its submission to warn that “the revised guide continues to offer significant challenges to the stockbroking profession and offers limited assistance in clarifying how advisers are to apply the code of ethics to their broking and investment advice practice”.
“We also stress that the lack of understanding evinced by FASEA about how stockbroking differs from financial planning continues to present challenges,” the SAFAA said.
And like the Financial Planning Association (FPA), the AFA and the Institute of Managed Account Professionals (IMAP), the SAFAA pointed to the entrenched shortcomings inherent in FASEA’s approach to Standard 3.
“The focus of most concern remains Standard 3, which changed from the original wording of:
‘You must not advise, refer or act in any other manner if you would derive inappropriate personal advantage from doing so’
to
‘You must not advise, refer or act in any other manner where you have a conflict of interest or duty’,” the SAFAA submission said.
“This significant amendment to Standard 3 was undertaken without consultation and the Standard remains unworkable in practice, particularly in light of the lack of a test of materiality or proportionality,” the SAFAA submission said
The SAFAA also made clear its concern that the FASEA had not adequately consulted on either the code of ethics or its guidance.
“No broking firms were consulted in relation to the revised guide, which would have clarified that the financial planning lens applied to both the code of ethics and the original guide continues to apply to the revised guide.
“While SAFAA was consulted much earlier in the year, it was in relation to the original guide and the explanatory response to submissions issued by FASEA at the end of 2019 rather than the revised guide. We did make the comment that fewer examples and a more principles-based approach would help in any revised guide and appreciate that this has been taken on board,” the submission said.
“Unlike financial planning, stockbroking has existed for many centuries and is highly regulated, governed by the ASIC Market Integrity Rules. The profession has made an incredible contribution to Australians’ economic strength, not only in terms of personal wealth creation, but also in the all-important equity formation for Australian companies, ranging from CSL, BHP and CBA down to the smallest and smartest technology and science successes.
“The key challenge in being subjected to a code of ethics and the original and revised guide aimed at the financial planning industry is that stockbroking provides a different service to clients and is remunerated differently from financial planning. Stockbrokers often work hand-in-hand with financial planners to advise clients,” the SAFAA submission said.
