The Australian Securities and Investments Commission (ASIC) has released guidelines on how signing up to a professional code can, in theory, exempt advisers from the opt-in obligation.
Under the Future of Financial Advice (FoFA) reforms, the government has created this exemption to, in the words of the Minister for Financial Services and Superannuation, ‘provide greater flexibility to industry whilst ensuring consumer protection is maintained’.
In a speech earlier this week to the Association of Financial Advisers/Financial Services Council Leadership Forum, ASIC Commissioner Peter Kell said the regulator had not yet approved any industry code.
“Not surprisingly, we do not yet have a detailed, concluded view as to what would be required to meet the proposed test that ‘ASIC is satisfied that the code of conduct obviates the need for persons bound by the code to be bound by the opt-in requirement’,” he explained.
“Our ability to approve codes is not new. We have had the power to approve codes under the Corporations Act since 2000, under s1101A. Guidance already exists about our minimum expectations in this area – our Regulatory Guide 183.
“I’d also add that ASIC has had considerable experience in approving other industry regulatory schemes, notably external dispute resolution schemes.”
Kell reiterated that a code is something that has to be taken seriously and cannot be entered into lightly, either by industry associations or individual code members.
“Codes sit at the apex of industry self-regulatory initiatives,” he said. “For ASIC, a code is essentially a set of enforceable rules that sets out a progressive model of conduct and disclosure for industry members that are signed up. Codes should therefore improve consumer confidence in a particular industry or industries.”
However he warned the industry that the watchdog’s processes would take time.
“In case it’s not clear by now, the code approval process will be careful and rigorous,” he said. “Any code will take a considerable amount of time to develop and it will take months (at least) rather than weeks for us to assess a code.
“Furthermore, when developing their codes, we expect applicants to undertake a proper consultation process.
“This will ensure that stakeholders are engaged in the code’s development and that relevant issues are identified.
“It’s particularly important for potential members to understand their obligations. ASIC does not want to see codes put forward that have not benefited from appropriate input by interested stakeholders.”
ASIC plans to publicly consult on its approach to code approval and relief powers once the legislation is finalised.
“We expect that, as well as the opt-in issue, codes will inevitably include provisions that cover various other aspects of FoFA, such as how to ensure proper dealings with clients.
“We will therefore take into account the outcomes of our consultation on regulatory guidance on subjects such as the best-interests test and conflicted remuneration in developing our approach to code approval.
“Realistically, this means it will be some time before codes that are consistent with the FoFA legislation are out in the marketplace.
“However, there is nothing to stop potential applicants for an approved code from starting to consider how they can work to make their code consistent with FoFA.”
Or as one planner quipped: “It may just be easier to go with opt-in!”
