FASEA Professional Conduct 2 — Questions and Answers
Question 1: Under the FASEA Code of Ethics, which standard requires financial advisers to act with integrity in all professional dealings?
- Standard 1 – Ethical behaviour (Correct answer)
- Standard 3 – Client care
- Standard 5 – Ongoing obligations
- Standard 7 – Professional competence
Correct answer: Standard 1 – Ethical behaviour
Standard 1 of the FASEA Code of Ethics requires advisers to act ethically and with integrity in all professional dealings.
Question 2: A financial adviser discovers a colleague has been making false statements to clients. What is the adviser's professional obligation?
- Ignore it unless the adviser is directly involved
- Report the misconduct through appropriate channels (Correct answer)
- Confront the colleague privately and take no further action
- Wait until formal complaints are lodged by clients
Correct answer: Report the misconduct through appropriate channels
The FASEA Code requires advisers to uphold professional standards, which includes reporting known misconduct through appropriate channels.
Question 3: Which of the following best describes the 'client care' obligation under FASEA Standard 3?
- Providing advice only when it is profitable for the licensee
- Placing the client's interests above all others, including the adviser's own (Correct answer)
- Ensuring the client accepts all recommended products
- Limiting advice to areas where the adviser earns the highest commission
Correct answer: Placing the client's interests above all others, including the adviser's own
Standard 3 requires advisers to prioritise the client's interests and not let self-interest or the interests of a third party override client welfare.
Question 4: Under FASEA requirements, what must an adviser do before providing personal advice to a retail client?
- Obtain a signed waiver of liability
- Identify and manage any actual or potential conflicts of interest (Correct answer)
- Secure approval from their licensee for every recommendation
- Confirm the client has no prior investment experience
Correct answer: Identify and manage any actual or potential conflicts of interest
Advisers must identify and appropriately manage actual and potential conflicts of interest before providing personal advice.
Question 5: A client instructs their adviser to execute a strategy the adviser believes is not in the client's best interest. What should the adviser do?
- Execute the instruction immediately as client autonomy overrides all other duties
- Refuse the instruction and terminate the client relationship
- Explain the concern clearly, document the discussion, and act in accordance with professional obligations (Correct answer)
- Seek approval from the licensee before discussing concerns with the client
Correct answer: Explain the concern clearly, document the discussion, and act in accordance with professional obligations
Advisers should clearly communicate concerns, document the interaction, and balance client autonomy with their professional obligation to act in the client's best interest.
Question 6: What does FASEA Standard 6 require regarding an adviser's ongoing professional development?
- Completion of CPD only if a complaint has been received
- Meeting annual CPD requirements to maintain competency (Correct answer)
- Undertaking CPD only when moving to a new licensee
- Completing CPD every five years to renew registration
Correct answer: Meeting annual CPD requirements to maintain competency
Standard 6 requires advisers to maintain and develop their professional competence through annual continuing professional development.
Question 7: Which of the following scenarios most clearly breaches the FASEA duty of honesty?
- Recommending a product with a small trailing commission that is disclosed to the client
- Omitting a material risk from a Statement of Advice to avoid discouraging the client (Correct answer)
- Charging a fee for a review service the client has not yet used
- Providing a general market commentary without a specific product recommendation
Correct answer: Omitting a material risk from a Statement of Advice to avoid discouraging the client
Omitting a material risk from a Statement of Advice to influence the client's decision is a direct breach of the honesty and integrity requirements.
FASEA Professional Conduct 2
Under the FASEA Code of Ethics, which standard requires financial advisers to act with integrity in all professional dealings?