Financial Planning
ASIC consults on advice code monitoring bodies

ASIC released its consultation paper detailing proposals for approving and supervising compliance schemes for the incoming code of ethics that all financial advisers must adhere to.

Under the professional standards legislation, the code of ethics developed by the Financial Adviser Standards and Ethics Authority (FASEA) will be enforced by ASIC-approved compliance schemes.

ASIC has proposed that the Corporations Act be reformed to require AFS licensees and authorised representatives to provide information to all code monitoring bodies to enable effective and proactive monitoring, chiefly where a code breach is suspected but not yet confirmed. At present, they are only required to do so in the event of a reactive investigation.

The regulator has also suggested financial advisers be legally bound to share materials with the monitoring body and to comply with the terms of the scheme and any decisions reached as the law does not currently compel financial advisers to comply with the directions of a monitoring body.

ASIC deputy chair Peter Kell said monitoring and enforcing compliance with the code of ethics is a significant responsibility that will be resource intensive for the bodies that take on this role.

"The compliance scheme framework is key to the successful operation of the proposed code of ethics, which must have the greatest possible influence on the behaviour of financial advisers," he said.

The corporate regulator said the code monitoring schemes are vital to improving the professional standards of advisers, and they must be robust, transparent, fair and consistent.

It also highlights that professional advice associations could potentially serve as code monitors. However, it also stressed the importance of independence and impartiality, saying that monitoring bodies must have appropriate measures in place to ensure independence from the industry it will be regulating.

To ensure this, ASIC has said the governing body for any monitoring body should be made up of a minimum of three non-executive members including an independent chair, a member with industry experience and a consumer representative. They must also all have the relevant expertise to fulfill their roles.

ASIC also said it is open to considering the possibility of entities pooling their resources in order to minimise costs and the duplication of work.

The consultation period will run until 28 June 2018 with a final regulatory guide to be released in September. Consultation on the draft code of ethics remains open until 1 June.

Read more: ASICFinancial Adviser Standards and Ethics AuthorityPeter KellFASEA
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