FASEA Requirements & Code of Ethics for Financial Advisers

    

The Financial Adviser Standards and Ethics Authority (FASEA) sets education, training and ethical standards for the financial services industry. The body approves qualifications and exams, develops the Code of Ethics, and sets CPD requirements for licensed financial advisers in Australia.

FASEA and licensing

A financial adviser must meet requirements set by FASEA in order to gain and keep their licence.

This is business-critical, as all financial services businesses in Australia are legally required to hold an Australian financial services (AFS) licence from the day they start trading. Further, any person working as a financial adviser must be a representative of an AFS licensee. 

AFS licensees and financial advisers must comply with the Professional Standards of Financial Advisers, a set of requirements detailed in the Corporations Amendment Act 2017. The Professional Standards require financial advisers to:

  • Comply with the FASEA Code of Ethics;
  • Comply with FASEA education standards; and
  • Complete at least 40 hours of continuing professional development (CPD) per year to maintain or increase their skills, knowledge and competence.

Meeting these criteria is key to compliance with FASEA requirements.

Financial Advisers (Authorised Representatives) must be registered within the public register of Financial Advisors which is published on the MoneySmart website but managed by ASIC. Essentially, this register is to assist the public in choosing an active, qualified advisor, to ensure the public receive the adequate advice they deserve. It is the responsibility of the AFS licensee to ensure their information is updated within the Register and it would be a breach if they did not do so. A license holder can authorise other individuals to update the Register on their behalf (e.g. their Employer). 

FASEA Code of Ethics

All Australian financial advisers must comply with a set of standards and values called the Financial Planners and Advisers Code of Ethics 2019 (sometimes referred to as the FASEA Code of Ethics, or simply, the Code). 

The Code consists of 12 standards, which cover four key areas of conduct: 

  • Ethical behaviour;
  • Client care;
  • Quality process; and
  • Professional commitment. 

It also specifies a set of values which financial advisers must “realise and promote”:

  • Trustworthiness;
  • Competence;
  • Honesty;
  • Fairness; and
  • Diligence.

Read a summary of the FASEA Code of Ethics.

Read the complete FASEA Code of Ethics document via the Federal Register of Legislation.

The FASEA Code of Ethics is meant to improve professional standards in the financial advice industry.

Per the wording of the legislation: “[The] Code imposes ethical duties that go above the requirements in the law. It is designed to encourage higher standards of behaviour and professionalism in the financial services industry.”

Financial advisers have the primary obligation to ensure they personally comply with the Code, and must keep appropriate records to demonstrate their compliance.

And according to FASEA’s guidance, financial services licensees – i.e. licensed financial services businesses – also have a role in monitoring and enforcing compliance with the Code. The licensee should structure their business operations in such a way as to help their representatives, employees and directors operate ethically under the Code.

FASEA Explanatory Statement

Along with the FASEA Code of Ethics, the legislation also includes a detailed explanatory statement detailing the values and standards that underpin the overall Code of Ethics. Each Financial adviser should spend time to read the Standards and use-cases in detail, which explain the intentions behind this required legislative change. 

For example:

  • do not seek to avoid your legal obligations
  • act in the best interests of each client
  • assist your client to understand their current objectives, situation, as well as their likely future circumstances
  • avoid conflict of interest or duty, or if you cannot avoid, you must disclose such conflict and refer them to someone else
  • act for a client with the client's free, prior and informed consent, ensuring they understand your remuneration 

The FASEA explanatory statement, essentially assists all financial advisers in understanding their obligations to their clients. 

FASEA education standards for financial advisers

FASEA sets the education requirements which financial advisers must meet in order to participate in the industry. As of the Education Standard commenced 1 January 2019, FASEA will approve a financial adviser’s participation in the industry only if they have completed any of the following ‘Education Pathways’:

FASEA education pathways for Financial Advisers

If you are an existing financial adviser or a new entrant into the industry, and you are unsure which Education Pathway applies to you, use FASEA’s Education Pathways Tool to find out. 

All financial advisers who advise clients about retail financial products are required to pass the FASEA exam. Existing advisers must pass the exam before 1 January 2022 (deadline was extended in June 2020 ). New entrants into the industry must pass the exam after they have completed a FASEA approved degree, and before they start Quarter 3 of their Professional Year.

Knowledge areas covered by the FASEA exam include legal and regulatory requirements of financial advisers, how to construct financial advice, and application of ethical and professional ethics and reasoning. 

FASEA CPD requirements

FASEA requires financial advisers to complete 40 hours of CPD every year. This is intended to help financial advisers maintain up-to-date skills, knowledge and competency, especially with regard to regulatory and technical developments affecting the industry. 

At least 70% of CPD time must be spent on activities which are approved by the licensee, of which a maximum of 4 hours may be spent on professional reading. 

FASEA designates minimum CPD time thresholds for the following mandatory subject categories: 

  • Technical – 5 hours
  • Client care and practice – 5 hours
  • Regulatory compliance and consumer protection – 5 hours
  • Professionalism and ethics – 9 hours 

FASEA provides a CPD Log Book template to help financial advisers manage their CPD (free download).  MCO also provides a solution for managing licenses, and education requirements within our Authorizations, Registrations and Licensing module

Due to COVID-19, FASEA is seeking an update via Legislative Instrument to the FASEA CPD requirements for this year, to extend the education period by 3 months. 

Why meeting FASEA requirements matters 

Financial advisers need to meet FASEA requirements in order to gain and keep their AFS licence. Without an AFS licence, operating as a financial adviser is against the law. 

Per Chapter 7 of the Corporations Act 2001: 

“Individuals who give unlicensed financial advice can be subjected to a maximum of five years imprisonment and/or a fine of up to $126,000 and corporations can be fined up to $1,260,000.” 

How MyComplianceOffice can help?

Financial services companies can ensure they and their representatives are meeting FASEA’s requirements by using the authorizations, registrations & licensing (ARL) management software from MyComplianceOffice. With MyComplianceOffice firms can use our RegTech solution to assist in monitoring and managing each employee’s status against FASEA’s ethical, educational and CPD requirements; the software allow managers to send alerts to team members who have upcoming or outstanding FASEA examinations or continuous professional education. This helps ensure diligent compliance with FASEA requirements, leading to high professional standards and reputational benefit. 

If you want to learn more, download our brochure, and take the first step to better manage employee Authorization, Registrations and Licensing (ARL) with greater efficiency and visibility. 

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