The ultimate disciplinary sanction capable of being imposed on a miscreant financial planner will be losing their membership of a professional body such as the Financial Planning Association (FPA) and therefore no longer satisfying their key requirement to operating as a planner — subscribing to a code of ethics.
That is the assessment of Australian Securities and Investments Commission (ASIC) deputy chairman, Peter Kell, who has revealed to the Senate Economics Committee the degree to which ASIC will be co-dependent on the professional bodies to oversee the planned new professional standards regime.
Responding to questions from Tasmanian Greens Senator, Peter Whish-Wilson, Kell reinforced the importance of the monitoring and administration of the codes of conduct by groups such as the FPA and the Association of Financial Advisers (AFA).
He said that ASIC would be doing more than just ticking off the efforts of the industry groups and would be closely monitoring planners’ adherence to the codes.
“…this goes to one of the key elements of the professional standards framework — one that we strongly support, and we have been very pleased to see the government bring it on,” Kell said. “This is the element that requires advisers to subscribe to a code of ethics. That is very important if you want to be regarded as a profession.”
“The way the framework is proposed to operate is that the monitoring and administration of the way in which advisers subscribe to that code will be undertaken by approved industry bodies. It is ASIC’s role to approve those bodies to ensure that they are capable of carrying out that task,” he said.
Kell said policing the codes of conduct would be when the rubber really hit the road for the professional association.
“It is really where the rubber hits the road for these sorts of bodies: do they have the capacity to monitor, to check how their members are behaving, to undertake, say, random spot checks and then, importantly, to discipline or take enforcement action against members that step over the line,” he said.
Asked by Senator Whish-Wilson whether the professional bodies would have the teeth necessary to undertake disciplinary action, Kell said it was something ASIC was working on “but in some ways the ultimate action in this space is that, if an adviser is not meeting the requirements, potentially their membership can be terminated. They will no longer satisfy that key requirement that they have to have if they want to operate in that industry, and that is subscribing to a code of ethics. So that is certainly the ultimate disciplinary action”.
