Fund Regulatory Updates

FASEA asked to clarify product conflict guidance

The Institute of Managed Accounts Professionals (IMAP) has asked the Financial Adviser Standards and Ethics Authority (FASEA) to clarify its guidance on the Code of Ethics. IMAP has taken issue with Standard 3, the standard that attempts to eliminate conflicts of interest from financial advice.

FASEA, in the most recent guidance, said that where advice is in the best interests of the client, safe harbour has been followed, fees are reasonable and disclosure has been made, standard three is likely to have been met.

IMAP says some information has been confusing and misleading, where conflicts are generally assessed as potential, perceived or actual, but the Standard 3 only mentions actual conflict. The written submission goes on to say: "However, the disinterested person test sets out a 'perceived' conflict and defines it as 'actual'. It states that if a 'disinterested person'... 'would reasonably conclude'... 'that the arrangements could induce the adviser to act.' This is a textbook definition of a 'perceived' conflict and it is not helpful in terms of achieving the intention of Standard 3, which is to ensure that advisers avoid all 'actual' conflicts."

IMAP wants advice to be assessed as it applies to an individual, rather than in a bulk way, saying that advisers both cannot fail or comply with Standard 3 if it’s in bulk.

The Financial Planning Association of Australia (FPA) also made a submission, agreeing that standard three has issues in terms of wording.

Corporate bond market faces inquiry

Hearings for the Inquiry into the Development of the Australian Corporate Bond Market are being held by the House of Representatives Standing Committee on Tax and Revenue. Peak bodies and market participants will discuss potential barriers in the regulatory regime for corporate bonds. Australia’s corporate bond market is small compared to other countries, despite regulatory changes across the past 10 years, with the inquiry looking into why that might be the case, looking for impediments.

Further information about the inquiry is available on the Committee’s website.