ASIC wanted sanctions spelled out in adviser code

18 December 2019

The Australian Securities and Investments Commission (ASIC) actively urged the Financial Adviser Standards and Ethics Authority (FASEA) to set out sanctions in the adviser code of ethics.

ASIC’s urgings have been revealed in ASIC’s submission to FASEA’s consultative process around the code made public this week as a result of questions asked during Senate Estimates.

The ASIC submission said that the regulator had noted “that the code does not set out any sanctions for breaches of the code while noting that “the Explanatory Memorandum to the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 contemplates that the code may include sanctions”.

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“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,” the submission said.

“The selection and application of sanctions is an area in which consistency between different compliance schemes would be valuable,” it said.

“ASIC has identified a broad list of sanctions that monitoring bodies may wish to impose for code breaches in our Consultation Paper 300 Approval and oversight of compliance schemes for financial advisers,” the submission said.

ASIC then made it clear that it did not want to be agency responsible for the sanctions.

“… 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 judgment about the seriousness of particular breaches of the code,” it said.

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It seems no one is getting what they want from FASEA, not even ASIC. I wonder how long this circus will be allowed to continue before they either call it a day on this experiment or make FASEA get their house in order?

Why don't we keep the sanctions simple !
Any breach of these draconian FASEA code of conduct rules and the unrealistic view that relate to "Conflicts of Interests" ( receipt of all commissions) should result in every adviser so judged,..... be "hung, drawn & quartered".

Lets not forget some of the consequences as a result of these left wing bureaucrats with their interpretation and imposition of the FASEA code that has resulted in approximately 4,000 leaving the industry so far, and, reportedly some 16 suicides this year, just isn't enough for ASIC or the government.
Lets finish off as many as we can, seems to be the agenda.
Always nail the low hanging fruit !

And the FASEA circus continues. Show some integrity FASEA and sort out this mess you have created. If you can't stop trying to save face and ask the Government for an extension. The more you guys try and save face, the deeper you dig yourselves into the cave you have created through incompetence. You expect advisers to act with integrity, yet you guys cannot. Absolute clowns!

The Minister should sack the entire FASEA Board.

I love how these releases are just squeezed out before Christmas, hoping by the time people come back in January they won't remember. Bit like me sending all my FDS's on Christmas eve.

all I'm trying to do is help clients with simple advice on super, insurance and retirement.. how complicated do you want this industry to be? Perhaps we should shunt people off to the call centres where they can take can give advice under the disguise of GENERAL is just a joke

Whinge sook whinge. Grow up.

Fred, are you suggesting tbat advisers are a bunch of whingers? You clearly have not been following the debate over the past 18 months or so. Money Management's own survey indicated tbere was over 75% support for the professional standards refirms, however 97% disagreed with how FASEA had gone about implementing them, and also the perception of conflicts with certain Board members. I would suggest you are in the minority on this one.

In ASIC's March 2018 submission to FASEA regarding the DRAFT Code of Ethics, Page 3 reveals the following in relation to their comments regarding Standard 3 :
" We agree with the principle expressed in this standard." (March 2018)
So, what happened between the draft Code of Ethics document and the insertion of the variable income clause stating that a breach WILL occur if any source of variable income (ie commissions or asset based fees) could be concluded to have induced an adviser to act ????
If an adviser were to provide advice and be remunerated either via a commission for risk insurance advice or an asset based fee, it could be easily " concluded " or created that the incentive for the adviser was the payment of remuneration from these sources.
In addition, Standard 3 now states that "...if you have a conflict of interest or duty, you must disclose the conflict to the client and you must not act".
So, if the receipt of either asset based fees or risk commissions as variable income could be concluded to act as incentive this will be deemed a conflict.
Therefore, anyone receiving either of these 2 types of remuneration is at an extraordinarily high risk of breaching the code either by acting when they should not have acted, or by merely being remunerated via these methods and post advice, accused of being incentivised to provide the advice.
This is very clearly and specifically designed to trigger breaches to the vast majority of advisers across the country and to attempt to re-write the current law in relation to these types of remuneration.
There is simply no protection for the adviser whatsoever in relation to the variable income clause and for Stephen Glenfield to continually repeat that the Code should be read as a whole document and not one part isolated from another is simply negligent and avoiding the unacceptable position that advisers have been put in.
In ASIC's November 2018 submission on Page 7, again referring to Standard 3, it states:
" We note that the example in the first dot point in paragraph 38 constitutes a clear breach of the ban on conflicted remuneration and not merely a breach of the code".
What happened between March and Nov 2018 and the release of the Code of Ethics in 2019 ??
This document is not just about ensuring ethical and morally acceptable principles and standards of advice and adviser behaviour.
There are clear sections of the code which have been subliminally developed to control remuneration methods and to eliminate risk insurance commissions and asset based fees.
If any individual believes otherwise, they also believe that an ideological war on the financial services industry does not exist.
Merry Xmas FASEA.

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