ASIC releases guidance on compliance schemes for new standards
ASIC has released guidance on its proposed approach to approving and overseeing compliance schemes for financial advisers under the new professional standards.
From 1 January 2020, financial advisers will need to comply with a code of ethics, which will be monitored and enforced by an ASIC-approved compliance scheme.
A monitoring body may be any entity other than an Australian Financial Services (AFS) licensee or an associate of a licensee.
The guidance released in RG 269 outlines how ASIC will grant approval to a compliance scheme and also sets out its expectations for the governance and administration, monitoring and enforcement processes, and ongoing operation of compliance schemes. You can access the guide here.
ASIC said it would approve a compliance scheme if it is satisfied that compliance with the code will be appropriately monitored and enforced under the scheme and the monitoring body has sufficient resources and expertise to appropriately monitor and enforce compliance with the code under the scheme.
In assessing whether a compliance scheme meets the criteria in RG 269.10, the corporate regulator said it would take into account a number of factors including the financial, technological and human resources of the monitoring body and where those resources are situated.
It will also consider the number of financial advisers whom the scheme is designed to cover, whether the location of the financial advisers who are designed to be covered by the scheme matches the location of the monitoring body’s resources and the consultation procedures that the monitoring body intends to use before making any changes to the scheme.
It will also look at the processes and resources that the monitoring body intends to use for administration, data management and reporting, including its capacity to appropriately handle personal information, and to fairly and effectively monitor compliance with the code and the scheme’s rules and decisions.
The competence of the monitoring body’s existing staff and its intended training procedures and whether it outsources any of its functions will also be considered, ASIC said.
ASIC deputy chair Peter Kell said effective compliance schemes are a key component of the reforms that will require higher standards of ethical behaviour and professionalism among financial advisers.
“Our guidance requires high standards for compliance schemes, reflecting the significant responsibility that monitoring bodies operating compliance schemes will have. This includes the responsibility to effectively monitor and sanction adviser members if required,” he said.
“The code of ethics is being developed by the Financial Adviser Standards and Ethics Authority (FASEA). At this time, FASEA has not released the final code. If there are significant changes from the draft code, we may need to revise our guidance when the final code is released.”