Financial advisers must consult on the draft code of ethics as it contains vague standards the industry has never previously been required to adhere to.
While it is already expected that advisers comply with a raft of legal obligations, wealthdigital technical manager Rob Lavery said the draft code contains several, less prescriptive measures the industry will also have to abide by.
A prime example is a condition to act in accordance with the spirit of all laws and regulations, Lavery said.
Labelling it a broad requirement, he said the measure is problematic as there is no definitive means of determining the spirit of the law.
"Is it revealed by the words of the politicians and review panels that may have recommended that law? Is it revealed by the explanatory memorandum that accompanied the bill? Is it identified by guidance from the regulatory body charged with enforcing that law?" he questioned.
Acknowledging that it is not the first time such a concept has been applied to professional conduct, Lavery said: "Nonetheless, it is a far-reaching concept that advisers should question while they have the opportunity to do so."
He said ethical challenges also arise when considering the code's requirement for advisers to hold each other accountable for the protection of the public interest.
"In essence, if an adviser sees a colleague or fellow industry participant, doing something questionable, they are required to report their suspicions to an appropriate authority...If they fail to do so, they may fall foul of the code of ethics and be penalised," Lavery said.
Lavery urged the industry to hold greater discussion around the measure as it has dual implications. While it may prevent unethical behaviour by requiring ethical advisers to pipe up, it could also engender mistrust between friends and colleagues, he said.
"This code will be more than the subject of compulsory study, it will be an enforceable set of standards that advisers will have to abide by. The time to help mould this important element of industry governance is now," Lavery said.
Industry stakeholders have until 1 June to make a submission to the Financial Adviser Standards and Ethics Authority on the matter.