The Australian Securities and Investments Commission is proposing to approve and oversee compliance schemes for financial advisors.

The "financial advice professional standards reforms" include obligations for financial advisers to comply (from 1 January 2020 onwards) with a code of ethics and submit to ASIC-approved "compliance schemes" under which people can monitor their compliance with the code of ethics.

A proposal known as RG 269.4 states that a monitoring body may be any entity other than an Australian financial services licensee or one of its associates. Financial advice professional associations and professional service firms are examples of the entities that may wish to have a compliance scheme, but there may be others. ASIC will look at every monitoring body to see whether it has the resources to take the job on.

In assessing whether a compliance scheme meets ASIC's criteria, the regulator will take into account the following factors.

• The financial, technological and human resources of the monitoring body and where those resources are situated.
• The number of financial advisors that the scheme is designed to cover (ASIC does not say what the desired number is).
• Whether the location of the financial advisors that are designed to be covered by the scheme matches the location of the monitoring body’s resources.
• The consultative procedures that the monitoring body intends to use before making any changes to the scheme.
• The processes and resources that the monitoring body intends to use for administration, data management and reporting (including its capacity to appropriately handle personal information), and to fairly and effectively monitor compliance with the code and the scheme’s rules and decisions.  
• Whether the monitoring body outsources any of its functions and how responsibility for these functions is maintained.
• The competence of the monitoring body’s existing staff and its intended training procedures.

The code of ethics is being developed by the Financial Advisor Standards and Ethics Authority, which has already consulted interested parties about an exposure draft of the code of ethics that it released earlier this year. The final code has yet to appear and there may be significant changes.