Code of ethics and compliance scheme

The Financial Adviser Standards and Ethics Authority (FASEA) has developed the Financial Planners and Advisers Code of Ethics (Code of Ethics) as part of the professional standards for financial advisers.

The Code of Ethics is a legislative instrument, and section 921E of the Corporations Act 2001 requires advisers to comply with the Code of Ethics.

For compliance dates for financial advisers and Australian financial services (AFS) licensees, see Timeline for the reforms.

Code of Ethics

As part of the professional standards, financial advisers must comply with the Code of Ethics.

The Code of Ethics is a set of standards and core values designed to encourage higher standards of behaviour and professionalism for financial advisers.

The Code of Ethics establishes 12 high-level ethical standards for financial advisers to meet, including:

  • acting in the best interests of clients
  • avoiding conflicts of interest
  • ensuring clients give informed consent and understand the advice they receive
  • ensuring clients clearly agree to the fees they will pay, and
  • maintaining a high level of knowledge and skills.

As well as complying with the Code of Ethics, all existing and new financial advisers must do the FASEA Code of Ethics bridging course. This course can be done separately or as part of an approved degree.

For more information, see the Code of Ethics on the FASEA website and ASIC’s media release ASIC outlines approach to advice licensee obligations for the financial adviser code of ethics (19-319MR).

Compliance schemes

In October 2019, the Government announced it will accelerate the establishment of a new disciplinary system and single disciplinary body for financial advisers. This will replace the role of monitoring bodies, which were due to be established by industry associations under the professional standards reforms for financial advisers.

AFS licensees are still required to take reasonable steps to ensure that their financial advisers comply with the Code of Ethics from 1 January 2020, and financial advisers are still obliged to comply with the Code of Ethics from this date onwards.

ASIC may take enforcement action where it receives breach reports.

For more information, see the Government's media release Taking action on the Banking, Superannuation & Financial Services Industry Royal Commission – Recommendation 2.10: New financial adviser disciplinary system.

Notifying ASIC of compliance scheme cover

As the new disciplinary body will displace the role of compliance schemes, compliance scheme applicants have withdrawn their applications for approval.

This means the compliance scheme regime will not be able to proceed at this time and licensees will not be able to comply with their obligation under the Corporations Act to ensure that their financial advisers are covered by an approved compliance scheme.

ASIC has granted a three-year exemption to AFS licensees from this obligation, and from the associated notification obligations. This means AFS licensees will not need to notify ASIC of compliance scheme cover for their financial advisers for this period.

For more information, see ASIC's media release ASIC relief from financial adviser compliance scheme obligations takes effect (19-309MR).

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Last updated: 12/12/2019 03:04