FASEA urged to withdraw and update contradictory code guidance
The Financial Adviser Standards and Ethics Authority (FASEA) needs to withdraw its original guidance around its code of ethics because multiple iterations have made the guidance both confusing and, at times conflicting, according to the Stockbrokers and Financial Advisers Association (SAFAA).
In a submission filed responding to FASEA’s consultation around Standards 3 and 6 pf the FASEA Code, the SAFAA has pointed to the two versions of guidance issued by the authority in 2019 and a year later in 2020 and pointed to them being cumulatively problematic.
“FASEA has not explicitly advised whether the revised Guide released in October 2020 replaces the 2019 guidance, or whether the revised Guide released in October 2020 is the final version, or whether the two Guides are meant to work together, or whether additional changes will be made to take into account feedback received as a result of the October 2020 consultation,” the SAFAA submission said.
“As a result there is an accumulation of guidance, which at times is conflicting. The confusion remains.”
“SAFAA recommends that FASEA issue a notice withdrawing the original guidance issued in 2019 — and its response to that guidance — and clarify that the revised Guide issued in October 2020 is the sole version of guidance which should be referenced.”
“We note that the Guide issued in October 2020 will need to be further revised following this consultation and recommend strongly that FASEA clarify that the third guidance constitutes the sole guidance.”
“As the Single Disciplinary Body is due to commence on 1 January 2022, clarity and certainty as to which guidance the body should reference is essential,” the SAFAA submission said.
Elsewhere in its submission, the SAFAA has urged FASEA to adopt Option 1 of its consultation around the wording of Standard 3 but has recommended that it adopt the following words – ‘Advisers must not advise, refer or act in any other manner where they have a conflict of interest or duty that is contrary to the client’s best interests.’
The Submission went on to say that Standard 6 of the Code “is an impediment to the provision of scaled or 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. Continuation of Standard 6 in its current form will also defeat any efforts by ASIC to provide meaningful guidance on scaled advice.”
“Stockbroking involves the provision of scaled advice hundreds of times a day. A client may want to purchase 1000 BHP shares at a particular price, irrespective of whether it fits the weighting of the portfolio, or a client may want to trade in speculative stocks, or Exchange Traded Options, seeking short-term profits. They do not want consideration of their broader, long-term interests or likely circumstances. Standard 6 is tailored to the need to consider a client’s long-term interests and circumstances as required in financial planning but does not accommodate clients wanting to access 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.”