FASEA Code of Ethics – important implications

AFA News 18 November 2021. On 26 November 2019, ASIC issued a media release to signal their approach to the FASEA Code of Ethics and the fact that they would take a facilitative compliance approach to Standards 3 (Conflicts) and 7 (Remuneration) of the Code of Ethics until the Single Disciplinary Body was operational.

Well, the Single Disciplinary Body will be operational from 1 January 2022, which means that this facilitative compliance approach to Standards 3 and 7 will come to an end.

Standard 3 – Conflicts of Interest

As we all know, FASEA is currently in the process of consulting with respect to changes to Standard 3 of the Code on Conflicts of Interest and Duty.  This consultation is open until 1 December 2021, and we encourage members to provide feedback to FASEA.  With the end of the year rapidly approaching, we expect that FASEA will move quickly to lock in a change to Standard 3 that will hopefully make the requirements easier to understand and also to comply with.

Standard 7 – Remuneration

So that leaves Standard 7, which relates to remuneration and states the following:

“The client must give free, prior and informed consent to all benefits you and your principal will receive in connection with acting for the client, including any fees for services that may be charged. If required in the case of an existing client, the consent should be obtained as soon as practicable after this Code commences.

Except where expressly permitted by the Corporations Act 2001, you may not receive any benefits, in connection with acting for a client, that derive from a third party other than your principal.

You must satisfy yourself that any fees and charges that the client must pay to you or your principal, and any benefits that you or your principal receive, in connection with acting for the client are fair and reasonable and represent value for money for the client.”

Up to this point, there has been a lot of confusion and concern about what an adviser needs to do to demonstrate that the fees and charges are fair and reasonable and represent value for money.  Fair and reasonable can be assessed in the context of the work that you need to do to provide the advice and all the related obligations and costs of your business. Value for money for the client is something that can only be assessed in the eyes of the client.  It is therefore appropriate for advisers to be asking questions of clients to confirm that they do appreciate the value of the services that you are providing. Documenting the answers to this question can help you to prove compliance with Standard 7 of the Code

For any questions on the FASEA Code of Ethics, please email policy@afa.asn.au.

Issued 18.11.2021. AFA Policy & Education Update