ASIC codes of conduct no panacea says AFA
There is insufficient evidence that codes of conduct overseen by the Australian Securities and Investments Commission (ASIC) will be any more effective than industry-run codes, according to the Association of Financial Advisers (AFA).
In a recent submission to the Treasury dealing with the consultation process around Industry Codes in the Financial Sector, the AFA pointed to the fact that, thus far, only one industry code existed in the financial advice space – that pertaining to ‘opt-in’.
“It needs to be noted that despite the ASIC [code] approval mechanism existing for many years, there is only one ASIC approved code in existence, which came into force on 1 July 2017 and only applies to a small number of participants,” the submission said.
“This particular code took a number of years to be approved and provides a mechanism for financial advisers to avoid compliance with the opt-In law (Corporations Act Section 962K) by agreeing to comply with alternative obligations under a code of conduct,” the AFA submission said. “In our view this does not present a benchmark for the benefits of an ASIC approved code.”
The AFA said it did not believe the Treasury consultation paper had adequately articulated a case for why the current approach with industry codes was not effective.
“The point is made that some of the codes do not cover 100 per cent of the market place. Action could be taken to address this,” the submission said noting that while the Treasury had referenced problems and ambiguities around enforcement of industry codes it had not detailed what they actually were.
“On this basis, we do not believe that we have enough evidence that ASIC approved codes would deliver a better outcome than industry led and managed codes of conduct,” it said.
“A fundamental change to a range of existing codes will have a substantial effect on the financial services industry which might deliver no net benefit to consumers. It should be noted that the consultation paper clearly states that codes should be set at a base level, rather than best practice, which is likely to have the effect of lowering standards in a number of areas.”
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