Industry codes await ASIC stamp of approval

Andrew Starke


April 17, 2012

Associations hoping their professional codes of practice meet with regulatory approval and qualify members for exemption from some aspects of financial advice reforms are facing a nervous wait.

The Australian Securities and Investments Commission (ASIC) must first ratify existing codes of conduct but approval does not necessarily equate to exemption from elements of Future of Financial Advice (FoFA) legislation such as opt-in.

The FoFA legislation was passed by the House of Representatives on March 22, 2012 and includes an opt-in obligation that requires advice providers to renew their clients’ agreement to ongoing fees every two years.

ASIC has the ability to exempt advisers from the opt-in obligation if they are satisfied that the adviser is signed up to a professional code which makes the need for the opt-in provisions unnecessary.

However, Dante De Gori, general manager policy and government relations at the Financial Planning Association (FPA), makes the point that the regulator approving a code and it entitling members to class-order relief from opt in are two different processes.

This is in part due to industry standards only making up a small part of the over-arching professional standards regime that ASIC will require.

“As far as I know, we have the only code currently in front of ASIC,” he said, adding that the FPA was in regular contact with ASIC and would consider amending its code if it failed to qualify for the exemption in its current form.

Professional standards, please

Some in the industry have questioned whether this extra compliance burden on the regulator is practical, given its stated aim of releasing comprehensive regulatory guidance before July 1, 2012 on a number of topics pertaining to FoFA.

ASIC will also be aware that the issue of professional codes may be the first test of the watchdog’s enhanced powers on industry compliance and enforcement.

Richard Klipin, chief executive officer of the Association of Financial Advisers (AFA), would neither confirm nor deny that the association’s Principles of Practice had been formally submitted to ASIC, saying only that the AFA is in an ongoing dialogue with the regulator.

“It is difficult to produce a professional code while we are still awaiting the regulator’s guidelines,” he says. “Especially when much of the legislation must still be defined.”

Taking a broader view, Self-Managed Superannuation Fund Professionals’ Association of Australia (SPAA) chief executive Andrea Slattery explains that while financial advisory associations have had industry codes, which outline conduct, they have not traditionally had a professional code that give guidance on professional standards and ethics.

“SPAA is the only association in this space that has a code of professional standards designed from the ground up,” she said in a reference to the fact that bodies like the FPA have adapted their professional standards from overseas peers and equivalents.

“Our code is slightly more robust and it has already enabled us to remove 17 members,” she added.

While SPAA is currently working with ASIC on how professional codes should look, Slattery stresses that the development of professional standards is an ongoing process and not one that can be changed overnight.

The regulator was asked by Professional Planner Online to comment and issued the following statement in response:

“ASIC is currently considering how to manage the approval of codes of conduct, including the process for approval and any additional guidance beyond RG 183 that may be required. These issues will form part of a consultation paper to be released by the end of June 2012.”

“ASIC is currently speaking with a number of industry associations about their codes of conduct and the implications of the FoFA reforms.”

TOPICS:  AFAasiccodeFPAprofessionalProfessional Planner OnlineSPAA