In December 2014 the Parliamentary Joint Committee on Corporations and Financial Services’ released its report entitled  “Inquiry into proposals to lift the professional, ethical and education standards in the financial services industry” (PJC).

The inquiry found that the current regulatory arrangements regarding professional standards are no longer sufficient to ensure high quality consumer outcomes and to maintain public confidence in the financial services industry. The report outlined a comprehensive model to increase the professional standards of advisers, involving a co-regulatory approach where Government, professional associations, industry and academia all work in partnership.

On 25 March 2015, the Federal Treasury released a consultation paper seeking views on the core elements of the PJC model including how these elements should be implemented.

The PJC Model

Under the PJC model, a financial adviser must be registered to provide financial advice. To be registered, the financial adviser must:

  • be a member of a Professional Standards Councils4 (PSC) approved professional association;
  • be degree qualified;
  • complete a professional year;
  • pass a registration exam; and
  • undertake ongoing professional development.

While ASIC will be required to maintain a Register of Financial Advisers, the PJC Model vests responsibility for standard setting, education, professional development and the enforcement of professional and ethical standards on approved professional associations.

Specifically, the approved professional associations are required to:

  • establish, control and fund an independent professional standards setting body called the Financial Professionals’ Education Council (FPEC);
  • advise ASIC when an adviser has passed the registration exam and completed their professional year;
  • advise ASIC if an adviser is no longer suitable to be registered;
  • manage members’ professional year and continuing professional development; and
  • establish a code of ethics for member advisers.

That is in contrast to the current regulatory framework in which the relevant training and competency standards fall solely on the individual AFS licensees. It is likely that AFS licensees will continue to be subject to these obligations in addition to the new responsibilities imposed of the approved professional associations (though this is an element on which submissions are specifically sought).

The Treasury Consultation Paper seeks stakeholder input in relation to the core elements and proposed practical implementation of this proposed co-regulatory model.

The closing date for submissions in Thursday 7 May 2015.

For a copy of the Consultation Paper and further information click here.

For a copy of the December 2014 Parliamentary Joint Committee report click here.