Minimum education standards, a professional training year, a mandatory exam and continuing professional development requirements will be developed by a new independent standards body for financial advisers under draft legislation released for consultation by the Federal Government. Existing financial advisers will be required to transition to the new standards, with both new and existing financial advisers being required to abide by a professional code of ethics and be listed on an ASIC professional register.
Under the laws, the new standard setting body will begin operations on 1 July 2016 and will develop new education and training requirements for a 1 July 2017 commencement. The code of ethics requirements will apply to all financial advisers from 1 July 2019.
The new education and standards will be enforced by:
- ASIC refusing to grant an AFSL to a natural person unless they meet the education and training standards;
- a prohibition on AFS licensees appointing an authorised representative to provide personal advice to retail clients unless they meet the education and training standards; and
- a prohibition on AFS licensees authorising an employee or director of the licensee, or of a related body corporate of the licensee, to provide personal advice to retail clients, on behalf of the licensee, in relation to “relevant financial products” if the employee or director has not met the education and training standards.
In addition, the terms “financial adviser” and “financial planner” will also be restricted terms, if providing financial services to retail clients, and will only be able to be used by those persons meeting the education and training standards. Wrongful use of the restricted terms will be a continuing offence, carrying a fine of 10 penalty units per day (currently $1,800) for each day the offence is committed.
AFS Licensees must also ensure that its “relevant providers” are covered by a compliance scheme approved by ASIC which provides how the code of ethics is monitored and enforced. Only compliance plans developed by a professional association or by the AFS licensee are eligible for approval by ASIC. Breaches of the code of ethics must be reported to ASIC, with a failure to lodge a notice constituting an offence carrying a fine of up to 50 penalty units (currently $9,000).
These changes represent part of the Federal Government’s response to the Financial System Inquiry, on which we have previously reported. Submissions to the consultation close on 4 January 2016.