Commissioner Kenneth Hayne’s recommendation for a new, separate disciplinary body for advisers could either result in the regulator’s code-monitoring bodies becoming completely marginalised or grant them vast new powers over advisers.
Central to Hayne’s recommendation for “a coherent system of professional discipline” is the requirement that advisers register with a new body that has the power to impose “serious disciplinary sanctions”.
While being careful not to be “overly prescriptive” on the relationship between the new disciplinary body and the existing ones – including AFSL holders, industry associations and ASIC – Hayne admits his solution could dilute the role of the proposed code-monitoring bodies.
“It may be that this new body is the most appropriate entity to perform the functions currently planned to be assigned to the code-monitoring bodies under the Corporations Act,” Hayne states.
‘A traditionalist, black-letter lawyer”
According to Deen Sanders, the former chief executive of FASEA and current partner in governance, regulation, conduct ethics and professionalism at Deloitte, Hayne’s expression of doubt regarding the future of code monitoring bodies “says a lot”.
While Hayne isn’t saying the proposed ethics monitoring bodies will be inadequate, Sanders believes, he is intimating that they may not fit the bill in their current form.
“He’s reflecting that there is a need for something more than that,” Sanders tells Professional Planner. “[Hayne’s proposed body] either sits above those code-monitoring bodies and between ASIC, or it operates in replacement of those code-monitoring bodies. He’s certainly suggesting that there’s something further to be considered about the way the code-monitoring bodies will work.”
Hayne is clearly an advocate for ethics and shows support for the code-monitoring bodies in the final report, writing that they “will play an important part in setting the tone and the culture of those who act as financial advisers”.
Their role may be marginalised, however, if Hayne’s new disciplinary body does the job for them. If made to choose, Hayne prefers the surety of a standalone disciplinary body with legal powers over the collection of industry associations – such as the Financial Planning Association and the Association of Financial Advisers – that have applied to monitor ethics.