Financial Planners and Advisers Code of Ethics 2019

Legal status of the Code

The Financial Planners and Advisers Code of Ethics 2019 was created by the Financial Services Australia Authority (FASEA) under section 921U of the Corporations Act. It is registered as legislative instrument F2019L00117.

Section 921E of the Corporations Act mandates that every ‘relevant provider’ (financial adviser) must adhere to the Code from 1 January 2020. Failure to comply with the Code can result in action by the Australian Securities and Investments Commission (ASIC) and referral to the Financial Services and Credit Panel (FSCP), which has the power to issue infringement notices, suspend or cancel registration. AFSL best interests duty section 961B

Following FASEA’s wind-up, responsibility for the Code has transferred to Treasury and ASIC. The Code remains in force as an Act-made instrument and operates alongside the best interests duty in Part 7.7A Corporations Act, not in place of it.

The 5 Values

The Code of Ethics 2019 outlines five core values that underpin the expected conduct of financial planners and advisers. These values guide behaviour and decision-making, ensuring a high standard of professionalism within the industry. Understanding and upholding these values is essential for maintaining client confidence and regulatory compliance. AFSL personal vs general financial advice

The five values are trustworthiness, competence, honesty, fairness, and diligence. Trustworthiness requires advisers to act ethically and treat clients fairly. Competence means advisers must possess the necessary skills and knowledge to provide the services they offer. Honesty dictates straightforward dealings with both clients and employers.

Fairness requires consideration of the impact of decisions on all parties, not solely the client. Finally, diligence demands a professional approach to work, ensuring that other interests do not inappropriately influence actions.

The 12 Standards

The Code of Ethics 2019 is structured around twelve Standards, outlining expected conduct for financial planners and advisers. Standards 1 to 3 address ethical behaviour, requiring compliance with all applicable laws and the underlying intent of those laws. They also mandate acting with integrity and avoiding providing advice where a conflict of interest or duty exists. AFSL Responsible Managers RG 105 details responsibilities for those in management positions.

Standards 4 to 7 focus on client care. These require financial planners and advisers to act only with informed consent and to ensure that all advice and products are in the client’s best interests. This includes ensuring advice and products are appropriate and clearly explained. Furthermore, the Standards require consideration of the broad effects of advice on the client and that fees and benefits are fair, reasonable, and represent value for money.

The final six Standards (8 to 12) relate to quality processes and professional commitment. These cover the need to keep complete and accurate records, maintain a high level of relevant knowledge and skills, uphold and promote the Code, cooperate with ASIC and monitoring bodies, and generally uphold and promote ethical standards within the financial services industry.

Enforcement and CPD link

AFSL holders have a legal obligation to ensure their authorised representatives adhere to the Code of Ethics. This responsibility is outlined in s 921E(3) of the Corporations Act, requiring AFSL holders to take reasonable steps to achieve compliance. Internal dispute resolution processes, as outlined in ASIC RG 271 internal dispute resolution, play a role in addressing potential breaches.

Relevant providers are required to undertake continuing professional development (CPD). A minimum of 9 hours of these 40 annual CPD hours must specifically focus on professionalism and ethics. This requirement is designed to reinforce ethical conduct and awareness within the financial planning profession.

Breaches of the Code are determined by Financial Services and Credit Panels (FSCPs), convened by ASIC under Part 9.6A of the Corporations Act. Possible sanctions for non-compliance include written directions, infringement notices (up to 60 penalty units for individuals), and suspension or cancellation of registration. Standards 3 and 7, relating to conflicts of interest and fees, have been the primary focus of ASIC and FSCP enforcement activity.