Professional Standards – FX Brokers

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on print
Victoria Lombardo

Victoria Lombardo

Victoria provides support to our compliance and legal teams and assists our clients with the preparation and collation of documentation required for AFS and credit licence applications. She also supports senior staff by providing assistance to clients with the maintenance of their licences through the preparation of compliance policy documents and ongoing compliance support.


Translate

Australian Financial Services Licensees (“AFS Licensees”) whose advisers provide personal advice to retail clients in a variety of products, including derivatives and/or foreign exchange contracts, are required to meet the education, training and ethical standards for financial advisers.

Training Standards – FX brokers whose staff provide personal advice

There are four education and training standards, three of which are preconditions to being authorised to provide personal advice to retail clients.

The three preconditions which advisers must meet, prior to being authorised, are:

  1. Complete an approved qualification as listed in the legislative instrument;
  2. Undertake a professional year of work and training that meets the requirements set by Treasury; and
  3. Pass the financial adviser exam as administered by ASIC.

Ongoing CPD

The fourth obligation is ongoing and requires financial advisers to complete 40 hours of Continuing Professional Development (CPD) each year. In relation to the ongoing CPD requirements, Treasury does not approve specific professional development activities.  Instead, AFSL holders are required to approve at least 70% of the activities completed by their financial advisers.

The minimum hours for CPD across the mandatory categories are:

  • Technical competence: five (5) hours
  • Client care and practice: five (5) hours
  • Regulatory compliance and consumer protection: five (5) hours
  • Professionalism and ethics: nine (9) hours

The balance can be made up of CPD activities from any category.

AFSL holders are also required to notify ASIC, via the Financial Advisers Register, if an adviser fails to comply with the CPD requirements. Accordingly, AFSL holders should keep detailed records of all ongoing training completed during the year.

Code of Ethics

The Financial Planners and Advisers Code of Ethics 2019 applies to those who provide personal advice to retail clients.  The Code was developed by the FASEA standards body and all advisers are required to comply with it. The responsibility for developing the Code now lies with Treasury.

The Code establishes 12 high-level ethical standards for financial advisers to meet, including:

  • acting in the best interests of clients
  • avoiding conflicts of interest
  • ensuring that clients give informed consent and understand the advice they receive
  • ensuring that clients clearly agree to the fees they will pay
  • maintaining a high level of knowledge and skills.

Training Standards –  FX brokers whose staff do not provide personal advice

Advisers who provide general advice only will not be subject to the requirements regarding ongoing CPD. At present, there are no specific requirements in relation to ongoing CPD for advisers who provide general advice only.  However, most in the industry complete an average of 20 hours per year to ensure their knowledge and skills remain up to date.

General advice advisers are subject to the current training standards contained in RG146. This includes holding a Diploma (for Tier 1 products) listed on the ASIC Training Register that meets the relevant training standards. Advisers providing personal advice must complete a course which covers these components:

  1. Generic knowledge; and
  2. Specialist knowledge about the specific products they advise on

 What action do I need to take?

Anyone providing personal advice on derivatives and/or foreign exchange contracts must review their current qualifications and determine whether they will need to conduct additional training to ensure compliance with the requirements.

For existing advisers, the following timeframes apply:

  • From 1 January 2019 – comply with the ongoing CPD requirements;
  • From 1 January 2020 – comply with the Code of Ethics;
  • Before 1 January 2022 – pass the financial adviser exam;
  • By 1 January 2026 – have an approved bachelor’s degree or above or equivalent.

AFSL holders should review their records and ensure all existing advisers providing personal advice have met, or are on track to meet, these requirements.

From 1 January 2019 all training and education standards commenced for new advisers and therefore AFSL holders engaging new advisers providing personal advice will need to ensure the requirements are met upon employment.

Compliance with the new standards, CPD requirements and Code of Ethics are included on the Financial Advisers Register. This has significant implications for advisers as the information regarding their CPD compliance and any breaches of the Code of Ethics is publicly available. AFSL holders and advisers listed on the Financial Advisers Register should review their records and ensure the Register is up to date.

Additional ASIC Powers

ASIC’s powers in relation to educational and training requirements include the ability to refuse AFSL applications to provide personal advice to retail clients where the applicants do not meet the training standards and the ability to ban a person if ASIC has reason to believe that the person was authorised when they had not met the three preconditions.

Background

In 2017, the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 introduced a range of reforms in relation to the education, training and ethical standards of financial advisers. Since 1 January 2019, the professional standards and training obligations have applied to financial advisers who provide personal advice to retail clients.

In 2021, the Financial Sector Reform (Hayne Royal Commission Response – Better Advice) Act 2021 transferred the oversight and implementation of functions relating to the reforms to the Minister and ASIC.  From 1 January 2022, the Minister and Treasury are responsible for setting the professional standards and ASIC is responsible for administering the financial adviser exam.

You can read an article published by us about the training standard changes on Finance Magnates.

Victoria Lombardo

Victoria Lombardo

Victoria provides support to our compliance and legal teams and assists our clients with the preparation and collation of documentation required for AFS and credit licence applications. She also supports senior staff by providing assistance to clients with the maintenance of their licences through the preparation of compliance policy documents and ongoing compliance support.


Obligation Free Consultation

We will call you back ASAP!

Recent Updates