How ASIC sought to rein in FASEA code

29 June 2020

Freedom of Information (FOI) documents covering exchanges between the Australian Securities and Investments Commission (ASIC) and the Financial Adviser Standards and Ethics Authority (FASEA) actually show ASIC trying to ensure that the FASEA code of ethics did not range further than the law.

However, ASIC noted that requirement in Standard 2 of the FASEA code to ‘act with integrity’ did go further than the law.

The documents show that, in particular, ASIC was concerned to ensure that FASEA’s Standard 2 was not wider than the actual best interests test under section 961B of the Act.

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“A financial adviser is expected under the law to consider a client’s future circumstances in giving advice that complies with the best interests duty in s961B,” the ASIC response said. “Therefore it is not correct to say that the ethical duty in Standard 2 is wider than the s961B obligation and is based on a ‘more professional’ relationship between the relevant provider and the client.”

“For example, where giving advice about a client’s life insurance arrangements, a financial adviser would be expected to consider, for instance, the client’s health (including any known health issues and their extended family health history), the implications of the client’s children being financial dependent on them where relevant, and whether the client can reasonably foresee any changes to their employment situation (planned or unexpected changes) in order to comply with the best interests duty.

“We are concerned that the statement in this paragraph that the ethical duty in Standard 2 is wider than the s961B obligation is incorrect and has the potential to create industry confusion,” the ASIC comments said.

“For this reason, we encourage FASEA to note that the requirement in this Standard for a financial adviser to look more widely at the client’s circumstances is an existing requirement under the law or to delete this comment. The part of the standard which goes beyond the law is to ‘act with integrity’.”

On the controversial Standard 3, ASIC sought to encourage FASEA to provide better examples of ethical dilemmas which entailed breaches of the code, but not the law.

“We think that this would better assist in understanding the meaning of “inappropriate personal advantage”, the ASIC response said.




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If even ASIC has problems with the FASEA Code, that seems to confirm what advisers have been saying all along. The FASEA Code was hijacked by zealots and activists, and is unworkable in practice. Hume needs to intervene immediately to fix it.

Hume is missing in action. No idea what she is doing at present for her area of responsibility.

Probably still telling people to download the COVID app & talking about what a great opportunity we have in giving $300 advice on whether to withdraw from their super.

FASEA remains a confused set of instruction that is not consistent with the spirit or intent of the laws and regulation from Section 961 and Section 912 of Corps Law. The fact that AFCA have vowed their underlying love for the FASEA standards mean that with the standards not clarified with clear examples and being implicit as to intent, AFCA will be in revenue raising mode at an advisers expense. This is not fair to the industry and does not give confidence to any practitioner. In all my years as a lawyer, I have never seen such a disgraceful mess of red tape and confused nonsense being used to malign an industry. for the sake, it seems to make advisers the scapgoat for incompetance by regulators, Ministers of the crown and the faceless FASEA board. The standards need to be clear with direction provided otherwise there can be no confidence provided to the industry, let alone consumers.

advisers have already shown their discomfort with the standards. about 100 are leaving each week. there won't be many left for afca or fasea to impose them on by 2024.

The common link between FASEA and AFCA is the "consumer associations" Choice and CALC. All four of these organisations have been hijacked by political activists who are attempting to impose their extremist ideologies on society.

The government needs to remove these activists from any government sourced power and funding.

Most importantly, they should not be allowed anywhere near the new financial advisers disciplinary body.

FASEA is a law unto itself. Doesn't even listen to Govt Depts that have been in this space for umpteen years. Say no more.

The evidence of ASIC's intervention is now starting to come to light.
It has long been suspected that ASIC played an integral role in the influence surrounding the FASEA Code of Ethics.
It is now becoming transparent that ASIC didn't just make submissions when able but were in regular contact and discussion with FASEA providing guidance and suggestions as to how the final draft would or should evolve.
The email on Nov 8th ,2018 from Leah Sciacca from ASIC referred to " phone discussions " whilst referring to
" thinking and ideas " at the same time clarifying that ASIC cannot be seen to be influencing the outcome.
But they were influencing the outcome...they were in regular contact....they were having phone discussions.
What was discussed during these phone calls, how many phone calls were made and over what period ?
ASIC wanted to have influence, FASEA were allowing them to have influence, but ASIC categorically stated they were not to be seen as having influence. Why ???.......because it would not be a good look for the regulator and the supposed independent process.
Were ASIC provided unlimited access to FASEA regarding the formation of the Code of Ethics when other interested parties were limited to submissions only ?
Were ASIC therefore provided with a significant advantage compared to other parties ?
How many emails went between ASIC and FASEA during this time ?
Did FASEA meet with ASIC and if so how many times were meetings held ?
It would be expected as that FASEA would retain file notes, logged phone calls and will naturally have email evidence in regard to these matters and as part of their compliance regime and best practice requirements.
FASEA should now be required to disclose all relevant evidence regarding ASIC's involvement.
Is this the reason that Stephen Glenfield did not reveal specific detail to Senator Amanda Stoker.
Senator Stoker's question asked: " You said FASEA conducted a number of consultations.Was one of them with ASIC?"
Stephen Glenfield then only answered the question by referring to the submission process.
What Stephen Glenfield did not reveal was that ASIC were in regular contact (ie consultations) with FASEA in addition to the standard submissions provided in March & Nov 2018.
The issues noted in this article regarding Standard 2 and Standard 3 are definitive.
There exists significant suspicion that ASIC had influence regarding the 'variable income' clause in Standard 3 as a way of eliminating both insurance commissions and asset based fees through breaches of Standard 3 and using this evidence as a catalyst to eventually have them banned.
To say this whole process stinks is a gross understatement.
For an organisation that has been provided the opportunity to define ethical behaviour and eliminate conflicts of interest, this is very rapidly becoming a compromised and unworkable position.

Agent 86 - surely you are jumping at shadows and seeing what you want to see. You say -
ASIC referred to " phone discussions " whilst referring to " thinking and ideas " at the same time clarifying that ASIC cannot be seen to be influencing the outcome"

Actually, what the email said was:
“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.” and "I confirm that ASIC provides this document to FASEA on the basis that it may assist FASEA prepare its guidance and the examples it wishes to include”

You see ASIC saying that ASIC "cannot be seen to be influencing the outcome" - I see ASIC saying - "Yeah, we'll have a look and give you feedback - but it's up to you".

It would indeed be a story if Fasea DID NOT have any contact with the pre-eminent financial services regulator when developing their framework.

The real issue is how much consultation and discussion occurred between FASEA and ASIC compared to the opportunity for other interested and vested parties to have the same level of communication, access and consultation ?
Of course ASIC would say they are unable to approve or endorse the final examples or for those to be attributable to them.
You see what you see, I see what I see.
What neither of us can see is the full evidence of the phone calls, emails and discussions that have taken place outside the standard submission process. ( that is " Move On " unless you are an ASIC operative attempting to put out a fire ? ).

Let's not forget that ASIC's feedback was given during the consultation phase based on the Draft Code. Following that consultation, FASEA issued the final code which was even more draconian and unworkable. One assumes ASIC now has even more concerns with the final code than the draft.

I have no problem with an ethicist and consumer advocates on the FASEA board, as they can provide valuable input, but unless a majority of the board are experienced, practicing financial advisers, we will continue to see unworkable, theoretical nonsense from FASEA. Imagine the CPA, Institute of Engineers or AMA without their own, experienced professionals on their boards? There would be an outcry. Our profession has never been given the chance to self govern. We have been bounced around like ball-bearings in a pin-ball machine by the vested interests of others. If Hume doesn't step in soon, she will be responsible for the destruction of tens of thousands of jobs.

Cough, cough. I challenge the statement that we weren't given a chance to self govern. I feel that we were, but not enough advisers were prepared to accept some of the ramifications of self governance one of which would have been an adjustment to remuneration methods which may have resulted in a greater justification of fees/commissions for services provided.

you are right, we were given a chance to self regulate but the industry bodies at the time were beholden to their members which largely consisted of the big banks employees so they could not go against their fee-paying masters.

the FPA and the advisers who still remain are paying the price (dearly) for that. this is why no one cares if the entire adviser population is decimated.

adviser ratings provide granular data each week, around 100 advisers leave every week with 0 joinings, with only 22,000 advisers remaining there won't be many left by 2024.

my estimate will be 5,000 by 2024

We've had plenty of time to self regulate. It was only some months ago that Chief Justice Haynes said that Professional Bodies could not be trusted to be code monitoring bodies. That was after Dante's appearance. With that we lost all chances of self regulation. I would like to hear how possibly anyone could remain an FPA member with the CEO still standing. Please explain FPA members?

The issue relating to this article is about the possibility or potential for undue influence.
Whilst self regulation would obviously have been preferred, it is now about the process that has taken place and the responsibility provided to an independent body.
If there is evidence that one organisation had significantly greater levels of involvement compared to other stakeholders, then despite whether that organisation has disclaimed their involvement is not an endorsement or should not be taken as influential, the sheer fact is if one organisation was granted significantly more opportunity for communication and that opportunity was taken, the balance of engagement is skewed and the input from that organisation has been received and considered on many more occasions than others.
The fact that one organisation may have been heard on many more occasions than others lends itself to at least the potential for influence.

I think a lot of fpa members are just biding their time before they exit the industry en masse.

I have first-hand knowledge of many fpa members questioning the value of their membership. I have seen them complain bitterly.

most are probably just waiting for the exam date, and then the education dates to be near before they resign and leave the industry.

at 100 per week, it's not going to take long before adviser numbers are halved.

Hayne was a Justice of the high court, not Chief Justice.

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