Disciplinary body could amend code of ethics

Despite the act giving “the standards body” the ultimate power to set the code of ethics for “relevant providers” in the advice industry, The Fold Legal solicitor and director Simon Carrodus told ifa that it also gave the relevant government minister of the day the power to decide who “the standards body” was.

“The minister has the power to declare any body corporate to be the standards body [based on] section 921X of the Corps Act,” Mr Carrodus said.

“So if FASEA merges with, or is absorbed into, the new disciplinary body, the minister could declare that new body to be the standards body.”

The comments come following a number of industry bodies including the AFA, FPA and SMSF Association coming out in continued opposition to the wording of Standard 3, which states that advisers must not “advise, refer or act in any other manner if you have a conflict of interest or duty”.

Mr Carrodus said from a legal perspective the wording of the standard was “confusing and unworkable”.

“The financial advice profession won’t have any certainty until the wording of Standard 3 is amended. No amount of guidance is going to solve this problem,” he said.

Mr Carrodus said the likelihood of FASEA amending the standard would depend on internal willingness to take on industry feedback, but there would be no additional legislation required for it to change the wording.

“It should not be difficult for FASEA to amend the wording of Standard 3. FASEA has the power to do this pursuant to subsection 921U(2)(b) of the Corporations Act,” he said.

“There may be a few hoops to jump through internally, but it shouldn’t be any more difficult than updating/releasing new guidance.”

However, Mr Carrodus said it was likely the government would look to roll the authority into the disciplinary body, given the confusion keeping the two bodies separate was likely to cause.

“I don’t see any benefit in having two separate bodies. The only guidance that matters is guidance from the body charged with interpreting and enforcing the code,” he said.

“Unfortunately, that body doesn’t exist yet.”