Synchron’s general manager of compliance, Phil Osborne, said the proposal by financial services minister Jane Hume should be “considered carefully and not be a knee-jerk reaction for popular support”.
“While principles-based regulation is the ideal destination for how we should be allowed to operate as an industry, we should regard this as a destination that will be arrived at after a bit more of a journey,” he said.
“We need to think of this in terms of the application – whose principles will be applied? Will we be allowing advisers to use their professional judgement and be guided by ethical standards, as has been promoted since the introduction of the Code of Ethics?
“If so, what happens when the regulator disagrees with the advice provided? Do we then have to discount the principles under which advice was actually given?”
Mr Osborne said what also should also be considered is the way in which the industry has “fumbled” the opportunity to apply principles-based regulation through the Code of Ethics in January 2020.
“The fact that it took the industry two years to understand that a concern for conflict of interest didn’t actually mean referral payments were banned under Standard 3 doesn’t bode well for how regulation on a principles-basis would actually be applied,” he said.
Mr Osborne said that before seeking a change it must assess the current legislation in place now, which he believes is “not that prescriptive or onerous”.
He added that being able to interpret what is there now will assist in understanding what is needed from principles-based regulation.
“Let’s get used to working with the Code of Ethics in conjunction with the spirit of the current legislation before we go changing anything,” he said.
The only problem with this theory is that the in-house counsel and the well paid external legal advisers to AFSLs are harvesting a large “fear premium” to ensure that no Adviser can trust their ability to exercise professional judgement. Even the article comments re “the regulator applying different principles…” means the industry is still wedded to the potential for unwanted regulator attention. Removing checklist law such as the “Safe Harbour Steps” would be one of Haynes J’s biggest successes. It would dearly upset the legal brigade as they would have to contemplate that an Adviser may be in the best seat to demonstrate they are acting in the client’s best interest. The nanny state will continue whilst ever there is a vested interest from lawyers. This is the biggest conflict of interest apparent in financial service ATM.