MAA250

Topic 5

Ethical Codes and Values

for Financial Professionals

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 LEARNING OUTCOMES

• Understand the meaning of a profession and the

elements of being a professional

• Understand why the codes of ethics are

necessary and the professional values and
principles in APES110 and FASEA

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 RECAP WEEK 1:
PROFESSIONAL ETHICS

Professional

• authority on the subject in which they are

practised

• in a position to remedy the problems presented to

them by their clients or employers

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 RECAP WEEK 1:
PROFESSIONAL ETHICS

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F U N D A M E N TA L P R I N C I P L E S O F
PROFESSIONAL CONDUCT

Principles
Public interest A duty to safeguard and advance the interests of the public before others
Competence The attainment and maintenance of a level of knowledge from formal
education, training and continual professional development, that enable a
professional to render services with expertise

Confidentiality To ensure that information acquired in the course of one’s work is not
disclosed to a third party without express authority
Due care Due care is the quest for excellence in the provision of professional services
and acting in the best interests of those who rely on it
Integrity Being straightforward, honest, sincere and using one’s convictions to
withstand pressure from significant others to impair integrity
Objectivity An impartial attitude that has regard for considerations relevant only for the
facts at hand
Professional Behaviour that is consistent with the good reputation of the profession
behaviour

Source: Dellaportas, Thomsen & Conyen, 2012, p. 79

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 E T H I C A L E X P E C TAT I O N

Financial Professional

May…

assume responsibilities in any part of the ethics

framework

Must…

maintain objectivity, integrity, independence, ethics

and competency of a professional person
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 PROFESSIONAL ETHICS

Financial Professional

• someone who assumes an obligation of self-

disciple above and beyond the requirements of
the law and regulation.

• takes on an additional burden of ethical

responsibility by adhering to the public interest

• have a larger responsibility to the public than to

client or employer’ (more in Topic 6)
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 PROFESSIONAL ETHICS

Conflict of Interest
Financial Professional
ANSWERABLE

Employer
Financial Public
Professional

Client

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 U N I Q U E F E AT U R E S O F A
FINANCIAL PROFESSIONAL

• Serve the interests of others (public interest or

the social good) by subordinating their own
interests.

• Professionals acquire a systematic body of theory

and institutional skills underpinned by education
and research.

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 U N I Q U E F E AT U R E S O F A
FINANCIAL PROFESSIONAL

• Professionals develop the ability to diagnose a

situation and apply knowledge to come up with a
treatment to a problem.

• Professionals in a position of authority know

more than their clients who are dependent on
them, a fact that give rise to “professional
authority” – the professionals are in a dominant
position and the clients are dependent on the
professional’s decision.

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 WHO DO WE TRUST MOST?

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 FINANCIAL ADVICE
ENVIRONMENT

• Broad range of ethical issues in financial advice:

– Vertical integration of the industry and self-interest &
incentives of financial advisers:-
orecommend aligned products
orecommend high commission products
• But professionals are in a position of authority know more than
their clients who are dependent on them – information
asymmetry (more in Topic 8)
• Have additional burden of ethical responsibility by adhering to
the public interest
• Thus, regulating and encouraging professionalism with strong
emphasis on ethical behaviour is necessary.
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 FINANCIAL ADVICE
ENVIRONMENT

Consider Professional Accountant:

• accountants’ roles in commercial environments, professional

practices and regulatory regimes
• the impact of competitive pressure and environmental
concerns
• questionable business practices
• corporate collapses and scandals
• decline in confidence and trust towards executives and
professionals, including accountants

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 FINANCIAL ADVICE
ENVIRONMENT

• Industry is regulated “top-down” approach through

government bodies such as Australian Securities and
Investment Commission (ASIC) and Australian Financial
Complaints Authority (AFCA).

• Industry is also regulated “bottom-up” approach through

licensees and associations.

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 FINANCIAL ADVICE
ENVIRONMENT
Tax
Practitioners
Board
ASIC Act 2001

FRC
ASIC FINANCIAL
AASB ADVISER
AAUSB FASEA

Corporation Act 2001

Industry
Associations

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AUSTRALIAN SECURITIES AND
INVESTMENTS COMMISSION ACT
2001

• Some of the objectives:

o Allows the establishment of Australian Securities and Investments
Commission (ASIC)
o to provide for ASIC’s functions, powers and business; and
o to establish a Takeovers Panel, a Companies Auditors Disciplinary
Board, a Financial Reporting Council, an Australian Accounting
Standards Board, an Auditing and Assurance Standards Board and
a Parliamentary Joint Committee on Corporations and Financial
Services

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AUSTRALIAN SECURITIES AND
INVESTMENT COMMISSION
(ASIC)

• ASIC was established by section 7 of the Australian Securities

and Investments Commission Act 1989
• consist of not less than 3 nor more than 8 members.
• Governor‑General appoints the members on the nomination of
the Minister
• At least 3 of the members must be appointed as full‑time
members and remaining members may be appointed as a
full/part time members.

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AUSTRALIAN SECURITIES AND
INVESTMENT COMMISSION
(ASIC)

• Role of ASIC:
– maintain, facilitate and improve the performance of the
financial system
– promote confident and informed participation by investors
and consumers
– issues financial licences and monitors financial services
businesses to ensure that they operate efficiently, honestly
and fairly
– supervision of operators of financial markets, operators of
clearing and settlement facilities and of financial market
participants

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AUSTRALIAN SECURITIES AND
INVESTMENT COMMISSION
(ASIC)

• Powers of ASIC:
– make rules aimed at ensuring the integrity of financial
markets
– investigate suspected breaches of the law, and in so doing
require people to produce books or answer questions at an
examination
– issue infringement notices in relation to alleged breaches of
some laws
– ban people from engaging in credit activities or providing
financial services
– seek civil penalties from the courts and
– commence prosecutions.

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FINANCIAL REPORTING COUNCIL
(FRC)

• Advise Minister to the extent that they affect the financial

reporting framework in Australia.
• monitors the development of international accounting and
auditing standards
• works to further the development of a single set of accounting
and auditing standards for world-wide use and promotes the
adoption of these standards.

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FINANCIAL REPORTING COUNCIL
(FRC)

• statutory body under Part 12 of the Australian Securities and

Investments Commission Act 2001
• responsible for overseeing the effectiveness of the financial
reporting framework in Australia.
• oversight of the accounting and auditing standards setting
processes for the public and private sectors- AASB & AUASB
• provide strategic advice in relation to the quality of audits
conducted by Australian auditors

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AUSTRALIAN ACCOUNTING
S TA N D A R D S B O A R D ( A A S B )

• An independent accounting standard-setter under the

Australian Securities and Investments Commission Act 2001.
o to develop a conceptual framework for the purpose of
evaluating proposed standards;
o to make accounting standards under section 334 of the
Corporations Act 2001;
o to formulate accounting standards for other purposes;
o to participate in and contribute to the development of a
single set of accounting standards for worldwide use;
o to advance and promote the main objects of Part 12 of the
ASIC Act, which include reducing the cost of capital,
enabling Australian entities to compete effectively overseas
and maintaining investor confidence in the Australian
economy.
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AUDITING AND ASSURANCE
S TA N D A R D S B O A R D ( A U A S B )

• an independent auditing and assurance setter under the

Australian Securities and Investments Commission Act 2001
• Comprises a maximum of 12 members, including the Chairman.
Chairman is appointed by the relevant Minister, members are
appointed by FRC.
• Roles:
• responsible for developing, issuing and maintaining auditing
and assurance standards
• contribute to the development of global auditing and
assurance standards
• contribute to the development of a single set of auditing and
assurance standards and guidance for world-wide use.

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 T H E C O R P O R AT I O N A C T 2 0 0 1

• A broad governing legislation that gives the financial advice

sector a structure and set of guidelines to create consistent
minimum standards across the profession.
• Corporations Act forms part of the formal regulatory context
within which financial advisers must operate.
• Section 766B of the Act, deals with the meaning of ‘financial
product advice’.

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F I N A N C I A L A D V I S E R S TA N D A R D S
A N D E T H I C S A U T H O R I T Y ( FA S E A )

• regulatory and compliance requirements are an important part of

reducing the risk of advisers doing the wrong thing, but poor decisions
cannot be avoided simply through more new regulations.
• Gov realise there is a need to educate and train financial advisers their
ethical obligations.
• Hence, FASEA was established in 2017 under the Corporations Act 2001.
• Some roles of FASEA:
• approving Bachelor (or higher) degrees, or equivalent qualifications
and determining the bridging course requirements for existing advisers
• determining the requirements for the work and training (professional
year) requirement
• setting requirements for continuous professional development
• making a code of ethics- FASEA Code

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 TA X P R A C T I T I O N E R S B O A R D
(TPB)

• is a national body responsible for the registration and regulation

of tax agents, BAS agents and tax (financial) advisers
(collectively referred to as ‘tax practitioners’).
• responsible for ensuring compliance with the Tax Agent Services
Act 2009 (TASA), including the Code of Professional Conduct.
• Financial advisers who are registered with the TPB will need to
follow both the Code and the TPB Code of Professional
Conduct.
• They also need to achieve the Continuing Professional
Development (CPD) requirements for each body.

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 I N D U S T R Y A S S O C I AT I O N S

• provide support, education, professional development and

representation for those working in financial services.
• set standards for & promoting professionalism — and its ethical
foundations.
• play an active role in facilitating the application of codes, such as the
FASEA Code, by providing training on ethics, leadership and governance.
• Example:
o Accounting and Finance Association of Australia and New Zealand
(AFAANZ)
o The Association of Financial Advisers (AFA)
o Association of Super Funds of Australia (ASFA)
o Australian Banking Association (ABA)
o Australian Council of Superannuation Investors (ACSI)
o Financial Planning Association of Australia (FPA)
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 I N D U S T R Y A S S O C I AT I O N S

• Professional associations influence member behaviour

by guiding members’ conduct to be consistent with the
expectations of the profession e.g. CPA,CA, IPA, FPA

• On a broad level, financial service professionals have a

responsibility to perform their duties to the best of
their abilities, and to ensure the protection of the
public interest

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 CODES OF ETHICS

“A code of professional ethics is a set of rules /

principles designed to induce ethical behaviour and
encourage public confidence in the profession and
professional practice”
(Dellaportas et al.)

• This unit: FASEA Code and APES Code

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 FA S E A C O D E

• Financial Planners and Advisers Code of Ethics 2019 (FASEA

Code) has been established by way of a Legislative Instrument
(LI) and designed by FASEA.
• FASEA was instructed to set ethical standards that go beyond
the requirements of existing law.
• Financial advisers are obliged to act in accordance with the
FASEA Code
• There is intersection between the FASEA Code and legislation
Example:
• while fulfilling Standard 2 of the FASEA Code, advisers should
also meet the requirements for fulfilling a ‘best interests’ duty
have been set down in the Corporations Act at section 961B.
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FA S E A C O D E O F E T H I C S

• Developed by The Financial Adviser Standards and

Ethical Authority
• An ethical standards body established in 2017 by the
Australian Federal Government to develop the code of
ethics for financial advisers.
• 5 core values underpin the 12 standards of FASEA
Code.
• At all times, financial advisers must act in a way that
demonstrates, realises and promotes the values of
trustworthiness, competence, honesty, fairness and
diligence.
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 FA S E A C O D E

FASEA Values   

Trustworthiness To act in good faith in your relationships with other people and act with integrity and
  honesty in all your professional dealings. Trust can be destroyed, in an instant, if the
adviser neglects, or is perceived to neglect, their duty to the client. 

Competence  To have regard to the knowledge, skills and experience necessary to perform your
professional obligations. Of equal importance is that this knowledge be applied in practice
and in ways that are tailored to the best interest of each individual client. It follows that
advisers should be aware of the boundaries of their knowledge, and hence the boundaries
of their ability to provide advice in particular scenarios. 

Honesty  To conduct yourself with complete integrity in all your professional dealings. It requires
transparency, frankness and fairness to each of your clients, even where this may cause
your personal detriment. 
Fairness  To bring professional objectivity to the task of engaging with clients professionally. It
requires you to properly investigate, evaluate and diagnose a client’s need for professional
services, and to self-reflect on the limits of your professional competency. 

Diligence  To perform all professional engagements with due care and skill. It requires you to manage
your time and resources to deliver professional services in a timely, efficient and cost-
effective way to each client. 

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 APES 110 CODE OF ETHICS

• APES 110 Code of Ethics is a framework for ethical

decisions developed by The Accounting Professional
and Ethical Standards Board (APESB).
• APESB is established in 2006 by CPA Australia and
Chartered Accountants Australia and New Zealand
(CAANZ) to develop and issue the code of ethics for
the accounting profession.

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 APES 110

APES110  
Principles 
Integrity  Being straightforward, honest, sincere and using one’s convictions to
withstand pressure from significant others to impair integrity 
Objectivity  An impartial attitude that has regard for considerations relevant only
for the facts at hand 
Competence and The attainment and maintenance of a level of knowledge from formal
Due care  education, training and continual professional development, that
enable a professional to render services with expertise. Due care is
the quest for excellence in the provision of professional services and
acting in the best interests of those who rely on it 

Confidentiality  To ensure that information acquired in the course of one’s work is not
disclosed to a third party without express authority 
Professional Behaviour that is consistent with the good reputation of the
behaviour  profession 
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 WHY THE CODES OF ETHICS
( A P E S 1 1 0 A N D FA S EA C O D E ) A R E
NECESSARY?

RECAP WEEK 1: Hierarchy of Ethical Decision-Making

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 WHY THE CODES OF ETHICS
( A P E S 1 1 0 A N D FA S EA C O D E ) A R E
NECESSARY?

• encourage ethical behaviour

• provide financial professionals with a common ethical
foundation to navigate the ethical complexity – a set of
guidelines to possibly identify the ethical dilemma and provide
a justified response to it.
• ensure professionals are committed in serving the best interest
of the public- promote public’s trust toward financial
professionals.

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 CASE STUDY
VOLKSWAGEN

The Volkswagen scandal was highlighted in the Week 1 online module.

This case highlight numerous ethical issues (e.g., corporate culture,
stakeholder responsibility, employee participation, professional
responsibilities), many of the core issues deal with ethical decision-
making and governance at all levels of the Volkswagen organization.
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 DISCUSSION POINTS

• How would you assign responsibility for the VW scandal? What

should have been done differently and by whom?
• Who are the stakeholders in this case? How were the interests
of each stakeholder represented?
• Is it fair to expect any employee, including professionals such as
engineers and accountants, to confront management over
directives that they believe are unethical?

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