The Australian Securities and Investments Commission (ASIC) released guidance on Future of Financial Advice codes of conduct on Friday, announcing its decision to exclude single entity codes.
The much-anticipated guidance confirmed the procedures for alternatives to the FOFA opt-in requirement, proving a checklist by which professional bodies can apply for FOFA codes.
The ASIC guidance confirmed that ASIC will accept an application for approval of a code with limited content – for the purposes of FOFA only – offering a checklist of code content that “obviates the need” for complying with the opt-in requirement.
“A FOFA code approved under our policy will provide a flexible alternative to complying with the opt-in requirement,” said ASIC commissioner Peter Kell.
“In particular, under a FOFA code, ongoing client arrangements may not terminate in the same way that they do under the law.”
The guidance also makes clear that “approved FOFA codes must meet substantially the same policy objective as opt-in: that is, they must promote client engagement and ensure clients do not pay ongoing financial advice fees where they are receiving little or no service.”
Financial Planning Association (FPA) chief Mark Rantall told InvestorDaily that the regulators approach was a “sensible solution to the opt-in dilemma,” particularly the decision to rule out single entity applications.
“We never thought licensee codes were appropriate – the monitoring aspects are too complex and it would be virtually impossible to get industry alignment of the structure of those codes,” he said.
“[The FPA] welcomes the fact that ASIC hasn’t gone down that path.”
However, the FPA confirmed that it will continue to push for “full code approval.”
“We believe pursuing that course will provide better professional recognition – you need both a complete code of professional code of conduct, a certification program and an ongoing commitment to certification,” he said.
ASIC will publish guidance on the FOFA conflicted remuneration provisions on Monday 4 March.
