In a separate article today, we discussed the introduction of the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Bill 2021 to Parliament and what it means for adviser registration.
As previously covered, though, the Bill also lays out how the responsibilities for adviser standards-setting and exam administration will be distributed between Treasury and ASIC once FASEA is wound up at the end of the year. Given that the overseeing minister will have discretion to set or amend standards under the new regime, one might wonder whether there is scope (or appetite) to make changes to the adviser Code of Ethics as it currently stands.
We've discussed the issues advisers and industry stakeholders have had with the Code of Ethics at length, and while explanatory material accompanying the original draft legislation for the above Bill acknowledged the industry's concerns, it also made clear no decisions had been made as to "when or if to change the Code of Ethics or other standards."
Indeed, the Bill submitted to parliament explicitly preserves the legislative instruments designed by FASEA, which means that advisers "will need to continue to meet the education and training standards and the Code of Ethics made by FASEA, until such time as the minister amends these standards or makes new standards."
As AFA interim CEO Phil Anderson notes, though, there is still theoretically time for FASEA to make changes.
"FASEA is still in place," he explains, "and it still has the power to make changes to their standards right up until the end of 2021. FASEA has made public statements in response to questions on notice from the Senate estimates that they are actually reviewing Standard 3 of the Code of Ethics based on consultation from late last year, so one hopes FASEA themselves do something sooner rather than later."
While the overseeing minister will have the authority to make their own amendments to the Code from next year (assuming passage of the legislation), Anderson believes advisers shouldn't get their hopes up about this happening too quickly.
"I would suggest a level of caution," he says. "The Government isn't going to do anything too drastic which might expose them to criticism from the Opposition."
Despite this, Anderson hopes that any future review of the standards incorporates many of the elements that were contained in the original explanatory memorandum that preceded the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017, including more comprehensive recognition of professional experience.
"That material specifically referred to the recognition of professional experience, but FASEA never did. It's not unreasonable that the overseeing minister would come back and reassess the intent of the original legislation."
As above, though, he doesn't think this is likely to happen in 2021. "There's room for changes," he says, "but you definitely shouldn't assume that, come January 2022, anything too fundamental will happen."
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