03 - Lecture 3 Compliance and Ethics BM Ch 1, 2; TJHM, Ch...

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Compliance and Ethics 1 BM Ch 1, 2; TJHM, Ch 2; CCH Ch 8; Day et al Ch 1; Lecture 3 ` Compliance Set of regulations and behaviours that must be met Reflects the attitude companies and their employees have towards the regulatory environment in which they operate ` An ethical framework is supported by and is reflective of community values which include: trustworthiness, honesty, integrity and diligence in respect of professional behaviour ` The core of the regulatory environment within which financial advisers operate: Corporations Act (2001) together with the Financial Services Reform Act (2001) (FSRA) FPA’s Code of Ethics and Rules of Professional Conduct 2 ` Need to protect consumers, and give them assurance about the advisory services industry ` Need for industry professionalism ` Growth of new investment products ` Failure of some financial services companies ` Significant growth in superannuation funds (and their assets) due to compulsory superannuation ` Foreign investment in financial services ` Globalisation, and its effect on financial services ` Continuing legislative reform, particularly the Financial Services Reform Act 2001 (FSRA), and Corporations Act 2001 3
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` In combination with the Corporations Act 2001, the FSRA: provides a single regulator for advice in fields of insurance, investment and retirement advice industry (ASIC) compels the industry to have a firm commitment to good ethics imposes an obligation on advisers to put the client’s interests first (fiduciary duty) 4 Financial Services Reform Act 2001 ` Management must ensure that: the compliance system reflects the firm’s values they provide the necessary resources to support compliance they make business decisions within the compliance framework their advisers comply with the system they support disciplinary outcomes from the system that there is a comprehensive and ongoing education and training program for all employees, not just financial advisers ` Ideally, the organisation should be committed to “best practice” 5 ` Why? Advisers are potentially subject to a number of offences, which often have high penalties Licence conditions require Principals to be vigilant in ensuring compliance is maintained (legal, policy and ASIC requirements), as they are ultimately responsible See CCH, p474 for requirements to be followed by advisers 6
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LICENSEES ` Have to meet a stringent set of requirements in order to maintain their licence ` Required to monitor, supervise and control the actions of their Authorised Representatives, to ensure that they are meeting their obligations and responsibilities ` Where the licensee is a member of the FPA, it is bound by their rules, as are individual members 7 INDUSTRY PARTNERS ` A number of other important service providers work within the financial services industry One large business may interact with insurance and non- insurance product providers, banking, licensees,
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This note was uploaded on 12/06/2011 for the course ECON 101 taught by Professor Shen during the Three '11 term at Monash.

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03 - Lecture 3 Compliance and Ethics BM Ch 1, 2; TJHM, Ch...

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