Remove Standard 6 from code: SAFAA
The Stockbrokers and Financial Advisers Association (SAFAA) supports a change to ‘Option 1’ on the proposed changes to Standard 3 but says Standard 6 needs to be removed.
In the consult released by the Financial Adviser Standards and Ethics Authority (FASEA), SAFAA said Standard 6 of the code of ethics needed to be updated as it affected scale and limited advice.
“SAFAA has long argued that this standard conflicts with the provision of limited advice and is inconsistent with section 961B of the Corporations Act,” it said in its submission.
“Continuation of Standard 6 in its current form will also defeat any efforts by ASIC to provide meaningful guidance on scaled advice.”
“While this standard remains unchanged, advisers providing scaled advice risk being found to be in breach of the standard by failing to take into account a client’s broader, long-term interests and likely circumstances.
“This issue has greater urgency as a result of the introduction of the Single Disciplinary Body on 1 January, 2022. Accordingly, SAFAA recommends that Standard 6 be removed from the code.”
Standard 3 Feedback
As part of its feedback on the wording of Standard 3, SAFAA supported ‘Option 1’, which would “incorporate FASEA’s intent into the standard”.
“You must only advise, refer or act where you do not have a conflict of interest or duty, being that which could reasonably be expected to induce you to act other than in the client’s best interest,” FASEA proposed in its consult.
SAFAA supported Option 1 but urged FASEA to adopt its own wording describing the intent of the standard rather than the “convoluted wording” FASEA had put forward.
Judith Fox, SAFAA CEO, said the association had long expressed concern about the wording of Standard 3 and sought its revision.
“The current wording of Standard 3 prohibiting a financial adviser from advising, referring or acting in any other manner where they have a conflict of interest or duty is unworkable in practice, particularly in light of the lack of a test of materiality or proportionality,” Fox said.
“The correct legal and ethical position is that it is only when a client’s interests cannot be prioritised that the conflict must be avoided.’’
SAFAA said FASEA captured this “correct” approach in its own wording used in the intent to the standard, but this wording was not used in Option 1 put forward by FASEA as part of its consultation.
It said FASEA had instead put forward “torturous wording” in Option 1 to get to the same result.
“We welcome FASEA putting forward an option that clarifies that a conflict of interest only exists when the adviser acts in a manner contrary to the client’s best interests,” Fox said.
“We support Option 1. But we query why the proposed wording needs to be more complex and less accessible than FASEA’s intent.
“The aim surely is to be as clear and concise as possible to facilitate compliance with the Standard. We urge FASEA to provide less complex wording by using its own language in the intent.
“This issue has greater urgency as a result of the introduction of the Single Disciplinary Body on 1 January, 2022.’’
AUTHOR
Chris Dastoor
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