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Code comparison with the Corporations Act 2001

Code comparison with the Corporations Act 2001

From the time they register with the Tax Practitioners Board (TPB), registered tax (financial) advisers are required to comply with obligations under the Code of Professional Conduct (Code) as contained in section 30-10 of the Tax Agent Services Act 2009 (TASA).

Many of the obligations under the Code are similar to the obligations of Australian financial services (AFS) licensees and their representatives under the Corporations Act 2001. As such, it is recognised that registered (tax) financial advisers who already comply with their obligations under the Corporations Act 2001 and other relevant Australian Securities and Investments Commission (ASIC) requirements will generally also comply with most Code obligations.

The following table provides a brief summary comparison of the Code and relevant obligations under the Corporations Act 2001. This table does not aim to comprehensively cover all the relevant obligations under the Corporations Act 2001. For further information about the Corporations Act 2001, please visit the ASIC website www.asic.gov.au

Code of Professional Conduct Principles Corporations Act 2001
1. You must act honestly and with integrity.

Sections 912A, 913B, 915C, 991A, 1041E, 1041G and 1041H

Obligations are similar. In particular, the following is noted:

  • Licensees have a general obligation to ensure that the financial services covered by their licence are provided efficiently, honestly and fairly.
  • In the course of carrying on a financial services business, a person must not engage in dishonest conduct (according to the standards of ordinary people) in relation to a financial service.
  • A licensee must not engage in conduct that is, in all the circumstances, unconscionable. Further, there are also obligations in relation to false or misleading statements or conduct under Part 7.10 of the Corporations Act 2001.
  • ASIC may suspend or cancel an AFS licence if no longer satisfied that the licensee or the licensee’s representatives are of good fame or character.
2. You must comply with the taxation laws in the conduct of your personal affairs.

No similar obligation exists in the Corporations Act 2001.

However, under the Income Tax Assessment Act 1997, it is a legal obligation for all taxpayers to comply with taxation laws for both their personal and business tax affairs.

3. If you receive money or other property from or on behalf of a client, and you hold the money or other property on trust you must account to your client for the money or other property.

For further information refer to Code of Professional Conduct - Holding money or other property on trust TPB(I) 15/2012

Sections 981B and 981H

The following is noted:

  • The licensee must ensure that money paid into a client’s account satisfies certain requirements.
  • Money paid to the licensee by their client (or their representative) is taken to be held in trust by the licensee for the benefit of the client.
  • Money held by the licensee on behalf of the client for the purchase or sale of a financial product or insurance, must be deposited into an account with an approved foreign bank or a cash management trust on the day it is received, or the next business day.
4. You must act in the best interests of your client.

Sections 961A, 961B, 961G, 961J and 961H

The person providing personal advice to retail clients is required to:

  • act in the best interests of the client in relation to the advice
  • give priority to the interests of the client in the event of a conflict of interest
  • ensure the advice is appropriate
  • warn clients if the advice is based on incomplete or inaccurate information.

Note: Section 961B outlines steps a provider can follow for the purpose of satisfying the best interest duty.

See also www.asic.gov.au for ASIC Regulatory Guide (RG) 175 - Licensing: Financial product advisers – conduct and disclosure, in particular Part E which gives guidance on ‘acting in the client’s best interests and related obligations’.

5. You must have in place adequate arrangements to manage conflicts of interest that may arise in relation to the activities that you undertake in the capacity of a registered tax practitioner.

For further information refer to Code of Professional Conduct - Managing conflicts of interest TPB(I) 19/2014

Sections 912A and 961J

  • Licensees must have in place adequate arrangements for the management of conflicts of interest that may arise (either wholly or partially) in relation to activities undertaken by the licensee or a representative in the provision of financial services.
  • If there are competing interests between the advice provider and the client, the provider must give priority to the client's interests when giving advice.

See also www.asic.gov.au for ASIC RG 181 - Licensing: Managing conflicts of interest.

6. Unless you have a legal duty to do so, you must not disclose any information relating to a client's affairs to a third party without your client's permission.

For further information refer to Code of Professional Conduct – Confidentiality of client information TPB(I) 21/2014

No similar obligation exists in the Corporations Act 2001.

However, it is noted that Australian Privacy Principle 6.1 in the Privacy Act 1988 requires you to not use personal information about an individual that was collected for a particular purpose (primary purpose) or for another purpose (secondary purpose) unless the individual has consented to the use or disclosure of the information.

7. You must ensure that a tax agent service you provide or that is provided on your behalf is provided competently.

Sections 912A and 961B

  • A licensee must maintain the competence to provide financial services and ensure that its representatives are adequately trained and are competent to provide financial services.
  • The person providing the advice must assess whether they have the expertise required to provide advice on the client’s identified subject matter. If the provider does not have the expertise, they must decline to provide the advice.

See also www.asic.gov.au for ASIC RG 104 – Licensing: Meeting the general obligations and ASIC RG 105 – Licensing: Organisational competence.

8. You must maintain knowledge and skills relevant to the tax agent services that you provide.

For further information refer to Continuing professional education policy requirements for tax (financial) advisers TPB(EP) 06/2014

Sections 912A and 961B

  • A licensee must maintain the competence to provide financial services and ensure that its representatives are adequately trained and are competent to provide those financial services.
  • If the person providing the advice does not have the expertise required to provide advice on the client’s particular subject matter, they must decline to provide the advice.
9. You must take reasonable care in ascertaining a client's state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing your are doing on behalf of the client.

For further information refer to Code of Professional Conduct - Reasonable case to ascertain a client's state of affairs TPB(I) 17/2013

Sections 961B and 961H

  • The person providing the advice must make reasonable enquiries to obtain complete and accurate information relating to the client’s relevant circumstances.
  • If it is reasonably apparent that the information on which the advice is based is incomplete or inaccurate, the person providing the advice must warn the client that:
    • the advice is, or may be, based on incomplete or inaccurate information relating to the client’s relevant personal circumstances, and
    • that the client should consider the appropriateness of the advice before acting on it.
  • If the person providing the advice does not have the expertise required to provide advice to on the client’s particular subject matter, they must decline to provide the advice.
10. You must take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client.

For further information refer to Code of Professional Conduct – Reasonable care to ensure taxation laws are applied correctly TPB(I) 18/2013

Sections 912A, 961B and 961G

  • A licensee must comply with financial services laws and take reasonable steps to ensure that its representatives comply with financial services laws.
  • The person providing personal advice to a retail client is required to act in the best interests of the client in relation to the advice. The resulting advice must also be appropriate to the client.
11. You must not knowingly obstruct the proper administration of the taxation laws.

Sections 912A and 1310

A person must not, without lawful excuse, obstruct or hinder ASIC, or any other person, in the performance or exercise of a function or power under the Corporations Act 2001.

There is also a general requirement that licensees must comply with financial services laws and that AFS licensees take reasonable steps to ensure that their representatives comply with financial services laws.

12. You must advise your client of the client's rights and obligations under the taxation laws that are materially related to the tax agent services you provide.

Sections 912A, 961B and 961H

No similar obligations exist in the Corporations Act 2001. However, the following is noted:

  • The person providing the advice must make reasonable enquiries to obtain complete and accurate information relating to the client’s relevant circumstances.
  • If it is reasonably apparent that the information on which the advice is based is incomplete or inaccurate, the person providing the advice must warn the client that:
    • the advice is, or may be, based on incomplete or inaccurate information relating to the client’s relevant personal circumstances, and
    • that the client should consider the appropriateness of the advice before acting on it.
  • There is a general requirement that licensees must comply with financial services laws and that AFS licensees take reasonable steps to ensure that their representatives comply with financial services laws.
13. You must maintain the professional indemnity insurance that the Board requires you to maintain.

For further information refer to Professional indemnity insurance policy requirements for tax (financial) advisers TPB(EP) 05/2014

Section 912B

Licensees must have arrangements for compensating retail clients for losses or damage they suffer as a resulting of a breach by the licensee or its representatives of their obligations in Chapter 7 of the Corporations Act 2001.

See also www.asic.gov.au for ASIC RG 126 – Compensation and insurance arrangements for AFS licensees.

14. You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.

Section 912C

While there is no requirement to respond to the TPB, there is an obligation for licensees to respond to ASIC.

In particular, licensees must respond to requests for information from ASIC within a reasonable time and as directed.

Further information