Ethics, Culture & Conduct in Financial Services

Consider this...

You’re just shy of revenue and funds under management performance targets, with the end of the quarter looming. A client’s risk profile is on the cusp of being ‘growth’ and ‘high growth’, but if you determine it is ‘high growth’ you can offer a solution that includes gearing and thereby boosts your performance metrics.

• What should you do?.......

Organisation Culture and Conduct

• Does your organisation actively practise its company values or is there misalignment of policies, procedures and conduct versus company values?
• What cultural, operational and regulatory challenges does your workplace face in trying to foster ethical attitudes and behaviours?

Ethical Dilemmas for your organisation

We offer an insightful series of Ethics, Culture & Conduct case studies to challenge individual and organisational behaviours to promote good governance in your organisation.

Each case study considers the following:

•  A description of the situation, adapted from real events observed, or complaints to the Ombudsmen, or published court cases

• An outline of the dilemma faced by the protagonist

• Consideration of the environment in which the protagonist operates

• Relevant news, legislation, outcomes of inquiries 

• Reflection questions throughout that can be used for group discussions

• Consideration of the company values 

• The outcome and consideration of how the issue may be avoided

• Assessment Questions that are designed as a reflection exercise for individuals completing the case study

Having a strong code of conduct can help to drive ethical behaviour if the code is respected and its principles become accepted conduct in the workplace. Ideally then the behaviours and conduct are such that as innovation and changing markets deliver new financial products or services, they will be sold or delivered in an ethical manner without the need to wait for regulations to catch up. The advantage of this approach is that it encourages responsible conduct and adherence to the spirit and not just the letter of the law. In addition, Codes are more flexible and adaptable to changes in products and markets than are laws, which usually lag.

The influence of regulatory inputs into conduct

Ethics involve “doing the right thing, not merely doing what the letter of the law demands”. However, ASIC’s regulatory guidance do provide some direction.

• For advisers of retail clients, the best interests duty is covered in Subdivision B - Provider must act in the best interests of the client of the Corporations Act, particularly s961B, which also includes coverage of how the best interests duty even applies to advice given by Australian ADIs on basic banking products, general insurance products and/or consumer credit insurance.
• Additionally, all licensees have an obligation “to act efficiently, honestly and fairly” (s912(1)(a) of the Corporations Act for AFSL holders and s47(1)(a) of the National Credit Act for ACL holders). This is commonly referred to as a ‘fiduciary duty of care’.
• ASIC guidance includes RG 104 Licensing: Meeting the general obligations (AFSL) and RG 205 Credit licensing: General conduct obligations (ACL), as well as other regulatory documents these guides cross reference.
• All FASEA-regulated financial advisers will be required to abide by the FASEA Code of Ethics from 1 January 2020 and will need to choose a body to monitor their adherence to the Code. The Code will be enforceable under the Corporations Act, with monitoring bodies having the ability to apply sanctions to an advice provider for breaches of the Code.

Related content