The Self-Managed Super Fund Professionals’ Association of Australia (SPAA) says it will modify its code of conduct to ensure its members are exempted from the opt-in provisions of the Future of Financial Advice (FoFA) reforms.
Under a late amendment to the FoFA bills last week, any practicing financial planner who signs up to a code of conduct approved by the Australian Securities and Investments Commission (ASIC) will not have to comply with the opt-in requirements.
Complying with opt in would require a financial planner to seek explicit permission from a client at least once every two years to continue to provide services to the client and to continue to charge the client for those services.
Opt in was one of the most hotly debated provisions of the FoFA package and until last week would have applied to all financial planners.
Now, it will only apply to financial planners who choose not to sign up to an appropriate code of conduct, and SPAA says it “will work closely with ASIC on the modification of our own code of conduct, to ensure it meets the standard required”.
Under Section1101A of the Corporations Act, ASIC may approve codes of conduct for professional roles that it regulates. These include financial services licensees, the authorised representatives of licensees and financial product issuers.
Regulatory Guide 183 (RG183) sets out what ASIC regards to be appropriate codes. It defines a code as ‘a comprehensive body of rules that sets enforceable standards across an industry or part of an industry, and delivers measurable consumer benefits’.
| RG183 code criteria 1. The rules contained in the code must be binding upon and enforceable against individuals who sign up to the code through contractual arrangements. 2. The code must be developed and reviewed in a transparent manner, which involves consulting with relevant stakeholders, including consumer representatives. 3.There must be effective administration and compliance mechanisms. Source: ASIC |
According to ASIC, it will not consider self-regulatory arrangements that do not have these characteristics to be ‘codes’ for the purposes of our approval power.
“These criteria are threshold tests that an applicant must satisfy before we will formally consider an application for approval,” it says.
ASIC codes should “elaborate on, exceed or clarify the law”. It is understood that this means any code of conduct that leads to a planner winning exemption from the FoFA opt-in proposals must achieve at least the same practical effect as the proposal, but by other means.
The chief executive officer of SPAA, Andrea Slattery, said in a statement that the association welcomed “the decision that financial advisors and planners, who are members of a professional body with a professional code of conduct will not be required to comply with the opt-in obligation that was proposed”.
Like the Financial Planning Association of Australia (FPA), SPAA maintains that the opt-in provisions of FoFA are unnecessary.
“Opt in was designed to deal with a lack of engagement by Australians in their financial affairs,” Slattery said.
“SPAA maintains its view that a statutorily imposed opt-in regime is unnecessary because the introduction of the best interest duty, the banning of commissions and the use of fee for service will assist in building trusted relationships with clients based on agreed terms with the client.”
