The Morrison government’s Better Advice Bill threaded the parliamentary needle Thursday, securing the final major reform from the Hayne royal commission and kick-starting a new era in the regulatory oversight of financial advisers.
From January 1 next year ASIC’s Financial Services and Credit Panel (FSCP) will become the single disciplinary body for advisers, and any complaints about advisers adherance to the Code of Ethics will be heard by a panel of industry members appointed by the relevant minister.
Peer review will now become the “primary channel by which misconduct is assessed and sanctioned,” the government stated.
Speaking to Professional Planner Friday morning, financial services minister Jane Hume said she was “pleased” to gain support of the crossbench and get the Bill across the line.
For advisers, Hume continued, having their conduct assessed by peers is a big step towards graduating from an industry to a profession.
“They can now behave and be treated in the same way as doctors and lawyers,” she said. “That peer review process is part of the journey to becoming a profession.”
A mudmap of regulators
The Bill will see a number of other reforms aimed at streamlining oversight in the advice industry.
Advisers who provide tax (financial) advice will no longer be subject to the disciplinary and registration system of the Tax Practitioners Board, while the functions of the Financial Adviser Standards and Ethics Board (FASEA), due to be wound up at the end of the year, will be transferred to Treasury.
According to Hume – who was appointed assistant minister for superannuation, financial services, and fintech in May 2019 and then minister for superannuation, financial services and the digital economy in December 2020 – the industry associations have been active in lobbying for a reduction in oversight bodies from day one.
“When I first walked into this job the very first thing the industry bodies did was show me a mudmap of all the regulators that had their eyes on advisers,” she said. “It’s great to not only deliver the Hayne recommendations but also unwind some of that oversight.”
The Bill’s passing also facilitates the extension of the cut-off date for advisers who have had at least two unsuccessful attempts to pass the FASEA adviser exam out to 30 September 2022.
Around 15,000 of the 19,000 advisers on ASIC’s register have passed the exam so far.
The Bill’s passing should mark the end of a stilted start for the Code of Ethics.
Policing the Code was originally scheduled to be handled by a code monitoring body, until Hume revealed at the 2020 Professional Planner Licensee Summit that the government was working towards creating a single disciplinary body to handle the job.
The decision irked the Financial Planning Association in particular, who had united with a handful of other industry bodies to pitch for the role under the guise of Code Monitoring Australia.
The plan for an SDB was delayed initially, however, due to the pandemic and other reasons, with the Code monitoring role being handed to licensees.
The appointment was ill-fitting, however, with few licensees willing to formally submit ethics breach notices, so the government has been keen to get the SDB plan finalised.
Work to do
Much still needs to be determined around the FSCP’s operations in its new expanded role. A fortnight ago ASIC commissioner Danielle Press said the regulator still didn’t know how the single discipinary body (SDB) would work.
“What we don’t have any idea about, or what we are waiting for is when the panel needs to be convened,” Press revealed.
The Association of Financial Advisers, while supporting the Bill’s passing, have also highlighted concerns about a proliferation of needless and costly investigations being convened by the FSCP for what may amount to minor breaches.
“We are concerned about ASIC being required to investigate minor breaches of the law, even if they do not choose to refer them to a [FSCP],” commented AFA policy chief Phil Anderson.
“This will add unnecessarily to the cost of running the Single Disciplinary body, which ultimately financial advisers and their clients will need to pay for.”