The AFA has slammed the code of ethics draft legislation released by the government last week, saying that some of the proposals will introduce more red tape and costs into financial advice.
In a release, AFA chief executive Brad Fox said that allowing licensees to create their own codes of ethics and appoint external parties to monitor and enforce them is likely to result in unnecessary duplication, and could give rise to serious conflicts of interest.
Mr Fox said further that the financial advice market already has access to robust and effective codes, such as the AFA's Code of Conduct: Principles of Practice (the Code).
"Members of the AFA adhere to six principles of professionalism that form the basis of the AFA Code of Conduct," said Mr Fox.
"They were developed through an extensive cross-industry collaboration so as to be appropriate to our members and their clients, and to effectively set expectations for ethical and professional conduct above and beyond the letter of the law. If licensees were to create their own codes, monitoring and resolution procedures, we believe it would be akin to reinventing the wheel."
Mr Fox said that if the approach outlined in the draft legislation were to be adopted, then the regulator would need considerable additional resources to assess numerous, possibly hundreds, of requests for approval of codes and/or third-party monitoring organisations.
The explanatory memorandum released with the draft legislation suggests an industry cost of at least $165 million.
"We are also very concerned about the perceived and real conflict of interest that would be created by allowing licensees to have their own codes, albeit with a third-party monitoring service," he said.
"This would mean licensees would need to sanction themselves for failure to adhere to their own code. We don't see this as best practice for an industry in the process of establishing itself as a recognised profession."
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