Codes of conduct and conduct standards applicable to providers and representatives
Binding conduct rules
Codes of Conduct issued under FAIS are binding subordinate legislation, not optional best practice. The General Code of Conduct for Financial Services Providers and Representatives sets standards for fair treatment, disclosure, suitability, conflicts of interest, record keeping, complaints and staff training. Specific codes may apply to particular product or service categories. Conduct standards require the FSP and its representatives to act honestly, fairly, with due skill and care, and in the client’s interest.
Core duties
Before rendering a service, the provider must disclose prescribed information, including the FSP’s identity and licence status, the representative’s status, the product supplier where relevant, remuneration or commission, conflicts of interest and material terms. Advice must be suitable to the client’s needs and circumstances. Records must evidence disclosures, advice, transactions and complaints. Conflicts must be identified and managed, not simply ignored.
Traps
Questions often suggest that a Code is merely “guidance” or that compliance is optional if the client does not ask. Disclosure must be proactive and timely. Another trap is assuming verbal disclosure is always sufficient; some disclosures must be in writing. A third trap is treating a commission disclosure as unnecessary because the client did not request it.
Worked rule
If a representative recommends a product that pays commission and the representative has a conflict, the disclosure must be clear, timely and recorded. The suitability assessment must still support the recommendation. Rule of thumb: disclose, document and do not mislead - if the client would be influenced by the information, it should be disclosed.