New FASEA guidelines to explain the Code of Ethics

The new compulsory Code of Ethics for financial advisers contains several important changes. The Financial Adviser Standards and Ethics Authority (FASEA) has issued guidelines to help advisers understand the Code, which came into force on 1 January 2020.

The FASEA guidelines include many case studies covering a range of situations to help explain how the Code is to be interpreted.

FASEA points out that the case studies are not intended to provide “definitive guidance”, noting that individual circumstances differ in practice and, “as with every profession, there is allowance for differences of professional opinion on how the ethical rules of the profession should apply in a particular case”.

FASEA adds, “doing what is right will depend on the particular circumstances and requires you to exercise your professional judgement in the best interests of each of your clients”.

FASEA describes the Code of Ethics as “a powerful framework to shape and reinforce ethical conduct and encourage a deeper engagement by the individual with their duties to their client as well as wider society”. It will be monitored by the Australian Securities and Investment Commission (ASIC) until a new government body is set up in early 2021.

Embedding higher standards

In a recent release, FASEA says the Code has been designed “to encourage and embed higher standards of behaviour and professionalism in the financial advice industry. As such, it establishes ethical duties that go beyond the minimum requirements of existing law. It should be noted that, as a legislative instrument, the Code has the force of law.”

Under the Code of Ethics, advisers are expected to act with trustworthiness, competence, honesty, fairness and diligence. The Code’s 12 standards cover ethical behaviour, client care, quality process and professional commitment.

FASEA says the values and standards set out in the Code are intended to shape every aspect of professional conduct.

Advisers are expected to regulate their own behaviour to comply with the Code. “You have a fundamental, personal, professional obligation to understand and to adhere to your ethical obligations under the Code. You cannot outsource this responsibility to your employer, or your licensee, or any other person.”

Records must be kept that demonstrate compliance with the Code. Financial services licensees are also expected to monitor and enforce their advisers’ compliance.

“Your licensee has a role to play in seeking to structure their business operations in a manner that facilitates you being able to operate ethically under the Code,” FASEA says.

Reflecting community expectations

The new obligations for financial advisers, “reflect community expectations that the provision of professional advice be centred on serving the best interests of the client free from any conflict,” FASEA says.

“The implementation of industry-wide, higher educational training and ethical requirements will require a universal effort over the coming years. FASEA considers that this effort is worth making – not least in the area of professional ethics. The reward for doing so will be an increase in public trust and confidence in this evolving profession.”

FASEA will hold a series of briefings for financial advisers and others in the industry to discuss and explain the Code.