The Australian Securities and Investments Commission has released a consultation paper outlining its proposed approach to approving and overseeing compliance schemes for financial advisers.

Incoming training and education requirements for financial advisers include obligations to comply with a code of ethics that is being developed by the Financial Adviser Standards and Ethics Authority (FASEA). Under the new legislative regime for adviser professional standards, compliance with this code of ethics will be enforced by ASIC-approved compliance schemes.

ASIC Deputy Chair Peter Kell said that ASIC will require high standards for compliance schemes. “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,” said Deputy Chair Kell.

Effective compliance schemes for the proposed code of ethics are a key component of improving the professional standards of financial advisers, and it is essential that they are robust, transparent, fair and consistent.

The proposals in CP 300 Approval and oversight of compliance schemes for financial advisers include:

• the process for applying for approval of a compliance scheme;
• our expectations for the governance and administration, monitoring and enforcement processes, and ongoing operation of compliance schemes;
• how we propose to exercise our powers to revoke the approval of a compliance scheme and to impose or vary conditions on the approval;
• our proposal to modify the law to ensure that monitoring bodies can gather the information from Australian Financial Services (AFS) licensees and authorised representatives that they need to carry out proactive monitoring activities; and
• draft guidance about the notifications that monitoring bodies must make to ASIC.

ASIC is consulting for six weeks on the proposals in the paper and we invite responses by 28 June 2018. We intend to release a regulatory guide setting out our final policy by the end of September 2018.

Download CP 300 Approval and oversight of compliance schemes for financial advisers

Background

• The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 amended the Corporations Act 2001, and commenced on 15 March 2017. It introduced a number of new requirements for financial advisers who provide personal advice to retail clients on more complex financial products.
• From 1 January 2020 all such advisers must be covered by an ASIC-approved compliance scheme under which their compliance with a new single, uniform code of ethics will be monitored and enforced. These compliance schemes will be operated by monitoring bodies.
• FASEA is responsible for developing the code of ethics and it released an exposure draft of the code on 19 March 2018, which is available from the consultation section of their website.