Regulatory Framework Analysis
regulatory framework that financial advisers must consider, and by which they must abide
There are a number of regulators in which financial advisers must consider and abide to ensure that clients and their assets are protected, and can confidently depend on a financial adviser in planning their retirement.
The core of the regulatory environment within which financial advisers must consider is the Corporations Act along with the Financial Services Reform Act, and the Financial Planning Association's Code of Ethics and Rules of Professional Conduct. ASIC is the major regulator in this industry and administers the FSRA and Corporations law as it relates to the financial services industry. All financial advisers have a fiduciary duty to their clients, regardless of whether there is a formalised agreement or contract between them. This is known as the " Know your Client" Rule, which states the adviser must always put the client's best interest first, and have a reasonable basis for advice. These rules are subsumed into FSRA and aim to protect the client from poor advice …show more content…
Other regulators which are considered are:
• Australian Prudential Regulatory Authority (APRA) which is responsible for the prudential regulation of deposit taking institutions, life and general insurance and superannuation;
• Australian Competition and Consumer Commission (ACCC) which administers the Trade Practices Act.
• Australian Taxation Office (ATO) which administers the taxation law and certain self-managed funds; and
• Reserve Bank of Australia (RBA) who is responsible for the monetary regulation.
Other sources of regulation include the Privacy Act 1998, the Superannuation Industry (Supervision) Act, and the Insurance Contracts Act.
(CCH, 2009)
the standards outlined in the FPA Code of
Client First : Requires the financial planner to act honestly and always place the client's interest ahead of their own personal or employer's gains or
interests.
Integrity: The financial planner's personal integrity is the key principle in which trust is built upon between the advisor and clients.
Objectivity: Any limitation of their ability to provide objective financial planning services should be disclosed. This ensures the integrity of the financial advisor's work, enables them to manage conflicts and exercise sound professional judgement.
Competence: financial advisers must attain and maintain the adequate skills and knowledge to provide the professional services competently. This is a continuing commitment to learning and professional improvement.
Fairness: Provide clients with services in a fair a reasonable manner. Financial advisor's should be honest, and disclose of any material conflicts of interest, and achieving a proper balance of interest by managing their own desires or any prejudices that may arise.
Diligence: Requires financial advisor's to act with due skill, care and diligence, and not to rush or be careless in delivering professional services.
Professionalism: Requires financial advisor's to behave with dignity and respect, to clients, fellow professionals and rules and regulations.
Confidentiality: Ensures that client information is protected and only accessible by authorised people, or only disclosed of with consent of client unless compelled by law.
Compliance: Ensures that financial advisers comply with FPA's constitution, regulations and professional standards.
(Financial Planning Association of Australia, 2008)
the obligations that licence holder faces with respect to all of their authorised representatives Licence holders are required to monitor, supervise and control the actions of all their authorised representatives to ensure that they are meeting their obligations and responsibilities. They also must ensure that the compliance system and the implementation strategy is communicated to, understood and complied with by everyone in the company.
The licence holder also needs to ensure that all representatives have undertaken compliant training as detailed in rule in FRSA: RG146. The licenses can show that the authorised representative complies through many ways including:
Successfully complete and individual assessment; or
Meet widely adopted and relevant industry standards or relevant standards set by APRA; or
Hold a university degree in a relevant discipline and complete a relevant short industry course; or
Hold relevant industry qualification at full diploma level of FPA Diploma of Financial Planning ; or
Provide a detailed submission to ASIC that satisfies them that the representatives nominated have the necessary skills and knowledge.
Licensees must perform an ongoing review of authorised representatives to ensure they comply.
(CCH, 2009)
Reference List
Financial Planning Association of Australia (2008) Code of ethics. Viewed: 19th September, 2010, http://www.fpa.asn.au/files/PubCodeOfEthics.pdf
CCH 2009, Australian master financial planning guide 2009/10,12th edn, CCH Australia Ltd, North Ryde.
Leung, P Coram, P Cooper, B & Richardson, P (2009). Modern auditing and assurance services, 4th edn, John Wiley and Sons, Milton Qld.
There are a number of regulators in which financial advisers must consider and abide to ensure that clients and their assets are protected, and can confidently depend on a financial adviser in planning their retirement.
The core of the regulatory environment within which financial advisers must consider is the Corporations Act along with the Financial Services Reform Act, and the Financial Planning Association's Code of Ethics and Rules of Professional Conduct. ASIC is the major regulator in this industry and administers the FSRA and Corporations law as it relates to the financial services industry. All financial advisers have a fiduciary duty to their clients, regardless of whether there is a formalised agreement or contract between them. This is known as the " Know your Client" Rule, which states the adviser must always put the client's best interest first, and have a reasonable basis for advice. These rules are subsumed into FSRA and aim to protect the client from poor advice …show more content…
Other regulators which are considered are:
• Australian Prudential Regulatory Authority (APRA) which is responsible for the prudential regulation of deposit taking institutions, life and general insurance and superannuation;
• Australian Competition and Consumer Commission (ACCC) which administers the Trade Practices Act.
• Australian Taxation Office (ATO) which administers the taxation law and certain self-managed funds; and
• Reserve Bank of Australia (RBA) who is responsible for the monetary regulation.
Other sources of regulation include the Privacy Act 1998, the Superannuation Industry (Supervision) Act, and the Insurance Contracts Act.
(CCH, 2009)
the standards outlined in the FPA Code of
Client First : Requires the financial planner to act honestly and always place the client's interest ahead of their own personal or employer's gains or
interests.
Integrity: The financial planner's personal integrity is the key principle in which trust is built upon between the advisor and clients.
Objectivity: Any limitation of their ability to provide objective financial planning services should be disclosed. This ensures the integrity of the financial advisor's work, enables them to manage conflicts and exercise sound professional judgement.
Competence: financial advisers must attain and maintain the adequate skills and knowledge to provide the professional services competently. This is a continuing commitment to learning and professional improvement.
Fairness: Provide clients with services in a fair a reasonable manner. Financial advisor's should be honest, and disclose of any material conflicts of interest, and achieving a proper balance of interest by managing their own desires or any prejudices that may arise.
Diligence: Requires financial advisor's to act with due skill, care and diligence, and not to rush or be careless in delivering professional services.
Professionalism: Requires financial advisor's to behave with dignity and respect, to clients, fellow professionals and rules and regulations.
Confidentiality: Ensures that client information is protected and only accessible by authorised people, or only disclosed of with consent of client unless compelled by law.
Compliance: Ensures that financial advisers comply with FPA's constitution, regulations and professional standards.
(Financial Planning Association of Australia, 2008)
the obligations that licence holder faces with respect to all of their authorised representatives Licence holders are required to monitor, supervise and control the actions of all their authorised representatives to ensure that they are meeting their obligations and responsibilities. They also must ensure that the compliance system and the implementation strategy is communicated to, understood and complied with by everyone in the company.
The licence holder also needs to ensure that all representatives have undertaken compliant training as detailed in rule in FRSA: RG146. The licenses can show that the authorised representative complies through many ways including:
Successfully complete and individual assessment; or
Meet widely adopted and relevant industry standards or relevant standards set by APRA; or
Hold a university degree in a relevant discipline and complete a relevant short industry course; or
Hold relevant industry qualification at full diploma level of FPA Diploma of Financial Planning ; or
Provide a detailed submission to ASIC that satisfies them that the representatives nominated have the necessary skills and knowledge.
Licensees must perform an ongoing review of authorised representatives to ensure they comply.
(CCH, 2009)
Reference List
Financial Planning Association of Australia (2008) Code of ethics. Viewed: 19th September, 2010, http://www.fpa.asn.au/files/PubCodeOfEthics.pdf
CCH 2009, Australian master financial planning guide 2009/10,12th edn, CCH Australia Ltd, North Ryde.
Leung, P Coram, P Cooper, B & Richardson, P (2009). Modern auditing and assurance services, 4th edn, John Wiley and Sons, Milton Qld.