ASIC FASEA submission asked for ethical dilemma examples

The Australian Securities and Investments Commission (ASIC) asked the Financial Standards and Ethics Authority (FASEA) to consider including ethical dilemma examples to understand the meaning of “inappropriate personal advantage” in regards to the code of ethics Standard 3.

Money Management obtained a copy of the ASIC submission that, at the time of writing, was still unable to be accessed on the FASEA website.

The submission matched material Money Management obtained earlier in the year via a Parliamentary Committee that said further guidance about the standard’s scope in the form of examples would encourage improved behaviour by financial advisers.

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On Standard 3 ASIC said: “We encourage FASEA to consider including an example of an ethical dilemma involving a breach of the code that does not involve a clear breach of the law. We think that this would better assist in understanding the meaning of ‘inappropriate personal advantage’ in Standard 3.

“In addition, we encourage FASEA to provide more context in relation to the situation in the example in the second dot point in paragraph 38. For example, it would be helpful if FASEA could state more specifically how the financial adviser’s duty to one client conflicts with their duty to their other client.”




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There is much, much more behind this issue regarding Standard 3.
Firstly, the makeup of the original FASEA board was such that the ideology behind a concerted push to use the breach of Standard 3 as a reason to eventually have reasons to recommend the abolition of asset based fees and risk insurance commissions was entirely obvious.
Secondly, what we don't know is the volume of email and phone contact ASIC had with FASEA in the intervening period and the content of that communication.
Phone recordings and all emails from ASIC to FASEA and vice versa should be requested to ascertain whether or not the regulator had influence in the current outcomes over and above the public submission process.

In the 2 ASIC submissions provided in March 2018 and Nov 2018 on no less than 7 occasions ASIC have used the terminology " we are concerned".......and on no less than 10 occasions they have used the terminology
" we encourage FASEA"................
There are also 3-4 references to " we suggest".......
What has occurred here is that ASIC have been very careful and deliberate in their wording of their submissions not to be openly seen as instructing or directing FASEA , however, by using these terms such as " we encourage ", we suggest" and
" we are concerned " , it is subliminal instruction and a request to act.
In the March 2018 submission, ASIC when referring to sanctions stated " We note that the code does not set out any sanctions for breaches of the code"....
" We encourage FASEA to consider setting out sanctions, and the code breaches for which FASEA would expect different sanctions to apply , in the final version of the code.
" However, we do not think it is appropriate for ASIC to provide guidance on which sanctions should apply to particular breaches because we are not responsible for setting the ethical standards and this, in our view, would involve making a judgement about a seriousness of particular breaches of the code".
So, on one hand ASIC submit highly detailed analysis, suggestions and requests to FASEA in regard to the Standards, wording, phrasing and terminology used including the inference of particular statements, but hold back on being seen to be making judgement in relation to a potential breach.
There now has to be significant and further investigation driven by Amanda Stoker into exactly what other communications between ASIC and FASEA took place and over what time frame.

If this was the medical profession or the legal profession etc that were dealt some of this crap, it'd be on the front page of every major newspaper and the government would be forced to step in and sort it out or scrap the code until it can be redone properly. Instead, we've received about as much mainstream media coverage as the Liechtenstein election results.

On 26th June this year, Money Management provided an article titled " FOI documents reveal ASIC's involvement in FASEA Code".
This article reported that the documents obtained cover nearly a 12 month period and make clear ASIC's views on the shape of the code were significantly accommodated by FASEA particularly with respect to examples and guidance.
But this article also revealed that ASIC made it clear that it did not want its work on the code of ethics attributed to it !
This means that ASIC had significant involvement but did not want the source of the input to be identified as coming from them....why not ??
Why would the regulator have a reason to not be transparent in the provision of the advice it was providing to FASEA ?
Why did the regulator seek to request the obscurity of their involvement ?
This article then refers to an email sent to FASEA on 8th Nov, 2018 by ASIC's Leah Sciacca.
" Attached is a document containing some further thinking/ideas on the examples we discussed on the phone".
So, it appears that prior to the email being sent on 8th Nov, 2018, there had also been a prior phone discussion in relation to " thinking" & "ideas" .
What were those thoughts and what were those ideas that were discussed via phone ?
The email states: " Additionally, while we are happy to look over the final FASEA examples, we are not able to approve or endorse them, NOR SHOULD THEY BE ATTRIBUTED IN ANY WAY TO ASIC, as it is for FASEA to determine whether they achieve the desired purpose."
The Money Management article states that the documents obtained show that FASEA kept in close contact with ASIC.
So, although there were 2 public submissions made by ASIC in March, 2018 and Nov, 2018 it appears that ASIC may have had significantly greater contact with FASEA than the other organisations who provided consultation/submissions. Could this result in ASIC having a significantly greater influence in the outcome of the Code of Ethics than any other organisation that provided submissions ?
If so, it is concerning that although there was analysis, commentary, discussion, ideas, phone calls and emails between ASIC and FASEA from April/March, 2018 through until early 2019, the specific request from ASIC to not attribute any of this to the regulator (other than the 2 formal public submissions), creates an environment of secrecy.
One only has to read the responses from readers in relation to the formation of the Code of Ethics, the involvement of ASIC in the process, the lack of trust and resentment that exists in FASEA and the unworkable Code of Ethics that has been produced to understand why this whole process has been flawed.
With the current state of ASIC's own internal governance being scrutinsed, challenged and questioned, is it any wonder that financial advisers and the industry in general has lost all faith in the process.

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