AFCA's June Smith

The Australian Financial Complaints Authority has revealed how it will handle adviser conduct obligations under the FASEA Code of Ethics, with deputy chief ombudsman June Smith saying it will take a “measured and considered approach” to interpreting the code’s provisions until the government’s single statutory body is established.

Speaking at the Financial Planning Association Congress in Melbourne on Friday, Smith indicated AFCA will take a “fair” approach to complaints, with an understanding that certain elements of the Code are still under construction.

“In assessing what is a fair resolution of any complaint, AFCA will assess whether the financial firm and its adviser have reasonably met that standard, being mindful that the interpretation of the standard is still being refined via consultation and ongoing rounds of guidance,” she said.

AFCA would follow the lead of ASIC, Smith explained, in working around the current uncertainty of some of the code’s provisions.

“We understand that it’s not certain yet how some of those standards will operate, that there will be additional guidance from FASEA going forward, and that the regulator has notified licensees that it will take a facilitative approach to compliance with the code – in particular standards 3 and 7,” she said.

Smith was presenting on a panel called ‘In the interests of others’ and was joined by compliance and adviser consultant Jenny Diggle as well as professional indemnity insurance specialist Ewan McKay.

There has been considerable angst from the advice community about how the complaints body would handle the Code of Ethics after the government announced that industry representatives would not operate as code monitors, and that licensees would be in charge of policing the code in lieu of an as-yet-unformed single statutory body.

FASEA chief Stephen Glenfield acknowledged uncertainty around certain standards of the code at the Congress on Wednesday, and said he may look at submitting a request for a legislative amendment to change some off the code’s wording after a 12 month road test.

After ASIC, then FASEA, revealed they would take a more accommodating approach in light of the code’s teething problems, AFCA was expected to follow suit. Smith paid credence to these factors, saying codes “don’t operate in a vacuum”, and that they have to be interpreted and applied in the “political, economic and professional context” in which they sit.

AFCA would deal with the Code of Ethics issues as they come, she explained, but that might be a while away.

“What we would need is a complaint after 1 January 2020 that alleged there had been conduct by an adviser post that date that had caused loss post that date,” she said. “We’re still dealing with matters that actually go back to the appropriateness test under the Corporations Act before Best Interest Duty, so it’s not likely that we would see a complaint that would likely raise issues with the FASEA Code for some time.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at
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