You must act in accordance with all applicable laws, including this Code, and not try to avoid or circumvent their intent.
Code of Ethics, Standard 1
Standard 1 looks obvious, and that is usually where trouble starts.
Of course, advisers must:
Comply with the law.
Comply with the Code.
Not avoid the intent of their obligations.
But, as a matter of course, nobody makes it so obvious by stating they are trying to circumvent the law. Nobody says, “Let’s see if we can structure this in a way that defeats the purpose of the rule but still gives us a pass mark.”
At least, not out loud anyway. It happens more subtly.
Standard 1 is aimed at everyday conduct and the small rationalisations that turn a professional obligation into a drafting exercise.
It’s not only aimed at the villain with the face paint and colourful costume, with burner phones and unusually complicated corporate structures. It’s aimed at ordinary everyday rationalisations that slowly erode ethics. Standard 1 asks a very simple question: “Are you complying with the law and the Code honestly, or are you trying to work around them?”
“(It’s the) law, not the ceiling (If) it ain’t right, it’s just a matter of time
The Black Keys (Gold on the Ceiling)
Applicable laws mean more than the one you remembered
Standard 1 requires advisers to act in accordance with all applicable laws, and the phrase matters.
It does not say comply with “the best interest duty”, “disclosure obligations”, or “regulated document laws”. It says all applicable laws.
For financial advisers, that may include the Corporations Act, the Code of Ethics, licence conditions, financial services laws, privacy obligations, anti-money laundering obligations, superannuation law, tax rules, social security consequences, trust law issues, estate planning implications and other laws relevant to the advice being provided.
The adviser is not expected to be a lawyer, accountant, tax agent, estate planner, Centrelink expert and therapist before lunch (but that is sometimes the reality depending on the client). However, the adviser is expected to know when a legal issue is relevant, when the advice depends on a legal assumption, when specialist input is required, and when the client should be told that a matter sits outside the adviser’s expertise. Standard 1 does not require the adviser to be omniscient, but it does require some humility.
The Code is part of the obligation and Standard 1 expressly includes the Code.
That is important because it stops advisers treating the Code as soft guidance or aspirational commentary. The Code has done a little couch hopping in the past and flies under the radar. My view is that any time there is a failure of a Core Obligation and breach of Ethical Standards, it is a Standard 1 issue (whether it is specifically stated or not).
Without naming individuals, there were some dark times in the past where a few of the good guys and villains alike viewed The Code as a fad, and it was going to go (along with advice documents). The reality is ASIC says relevant providers are required to comply with the Financial Planners and Advisers Code of Ethics 2019 as part of the professional standards framework.
The Code is not a motivational poster. It is a legal and professional obligation.
This means the adviser cannot satisfy Standard 1 by complying only with the technical rules in the Corporations Act. The adviser must also comply with the Ethical Standards themselves. Explicitly and completely.
Why does that distinction matter? It matters because the Code often asks broader questions than the black-letter law. It is concerned with conduct, judgement, integrity, client understanding, conflicts, fairness and professional behaviour.
An advice file may technically contain the right documents and still fail to demonstrate the ethical judgement expected of a professional adviser.
This is the gap Standard 1 is trying to close.
Do not avoid the intent
The most interesting part of Standard 1 is not the requirement to comply with the law. It is the requirement not to try to avoid or circumvent its intent. This is where the Standard moves from compliance to character.
There is a difference between:
Applying the law properly and gaming the law.
Legitimate scoping and artificial exclusion.
Efficient advice and stripped-down advice designed to avoid inconvenient facts.
Disclosure and concealment with a footnote.
The client request and what’s in their best interest.
Spidey senses are activated when we see things like this in the file:
“The client asked for it, so it is fine.”
“We disclosed it, so it is covered.”
“The template allows it.”
“The product provider says it is acceptable.”
“The client signed the authority.”
Standard 1 requires advisers to look beyond whether a workaround can be made to fit. It requires them to ask whether the approach is consistent with the purpose of the obligation.
Technical compliance is not ethical compliance
Advice businesses benefit when there’s a solid process, and advisers are engaged with it.
That is understandable because process provides structure. It supports consistency and assists licensees to supervise advisers. Process gives compliance teams something to test other than ‘vibes’.
But, when not implemented or followed correctly, it can also create false comfort.
A checklist can confirm that an SOA was provided. It cannot, by itself, prove that the advice was appropriate.
Disclosures can confirm that a conflict was mentioned. It cannot, by itself, prove that the conflict was managed.
A consent form can confirm that the client agreed. It cannot, by itself, prove that the client understood.
The scoping statement can confirm that an issue was excluded. It cannot, by itself, prove that the exclusion was adequately considered beforehand.
It is not necessarily whether the form was completed. It is whether the adviser acted consistently with the law, the Code and the purpose of the obligation.
That is a higher standard and very much a professional one.
Scope: Standard 1 testing ground
issue(s), limit the advice, manage cost and focus the engagement.
ASIC have made their view on subject matter and scope very clear.
“The…main causes of files being assessed as non-compliant were…the advice provider failed to identify the subject matter of the advice and the member’s objectives, financial situation and needs.”ASIC Report 639
ASIC’s view is that if the subject matter isn’t properly identified, the advice can’t be properly scoped. Therefore, it is unlikely to be appropriate, or in the client’s best interest.
Everyone makes mistakes. However, Standard 1 is engaged when scope is used to avoid the intent of the adviser’s obligations. This is where the distinction lies, with the key word being ‘intent’.
For example, a client may ask for advice about rolling over super but not insurance. That may be fine. But if the client has existing insurance inside the fund being replaced, the adviser cannot pretend insurance is irrelevant or ignore it simply because they don’t like giving insurance advice.
A client may ask for SMSF advice only. That may be fine. But if the client lacks the balance, competence, time, diversification or trustee understanding to make the strategy work, the adviser cannot avoid those issues by defining the scope to suit. For example, scoping out the appropriateness of the structure, but advising on contributions, rollovers and investments.
A client may ask for product replacement advice. That may be fine. But if the comparison is designed so that the recommended product looks better, this may suggest bias rather than professional judgement.
The fence must be honest, and if it is used to avoid foreseeable and material issues, Standard 1 may arrive on the scene, and it is unlikely to be welcomed with open arms.
Alohomora!
Hermione Granger (the useful spell used when bypassing legal and regulatory obligations).
Disclosure is not a magic spell
Disclosure is important but inadequate by itself. This is old news (for some) and disclosure does not have the magical and mythical powers it once had. It bellows loud, bold and proud of where it’s been, but it needs help.
Clients should absolutely be told about fees, risks, conflicts, limitations, product features, replacement consequences and other material matters. Good disclosure helps clients make informed decisions, but a conflicted recommendation does not become appropriate because the conflict was disclosed.
A risky strategy does not become suitable because the risk was mentioned.
A narrow scope does not become adequate because the client signed an acknowledgement.
A poor recommendation does not become defensible because the warning box was bold.
Disclosure supports good advice. It does not replace it.
Standard 1 requires advisers to avoid using disclosure to circumvent the purpose of the law. If the purpose of the obligation is to protect the client, inform the client or manage a risk, the adviser needs to do more than technically disclose the issue and move on.
The client needs to understand the issue and the adviser needs to deal with it – directly.
Everyone does it! Everyone’s doing it!
Gary (former lemming, recently deceased)
There are few phrases more dangerous in compliance than “everyone does it”, or “industry practice”. Industry practice may be useful context, as it may show how peers approach a difficult issue, and it may assist with benchmarking.
Beyond this, it is not a viable defence, or substitute for legal or ethical analysis.
If the industry practice is sound, it should be possible to explain why. If it cannot be explained, it may simply be a bad habit (with lots of subscribers).
This matters for licensees too. A licensee cannot supervise conduct properly if its operating model quietly rewards technical avoidance. If advisers learn that the firm values speed, volume, product flow or file appearance more than ethical judgement, Standard 1 problems will not remain isolated for long.
Culture is not what the policy says; it’s what the business tolerates.
What should the file show?
The file should show that the adviser understood and applied the relevant obligations ‘in substance’.
The file should demonstrate that the adviser identified the applicable obligations, dealt with material legal and ethical issues, and did not use process, scope or disclosure to avoid their purpose.
A strong file will usually show:
Advice was provided within the adviser’s authority, competence and licence permissions.
Laws, rules or constraints that materially affected the advice were identified and managed.
Whether tax, legal, estate planning, social security or other specialist input was needed.
Scope was appropriate and not artificially narrow.
Material risks, limitations and consequences were disclosed, explained and understood in a way the client could understand.
Conflicts were avoided and properly managed (not merely disclosed).
Recommendations weren’t reverse-engineered to fit a preferred outcome.
Reasoning was documented where an issue was complex, marginal or capable of challenge.
The adviser acted consistently with the purpose of the obligation, not just the wording.
Standard 1 is the foundation
Standard 1 is not the glamorous member of the Ethical Dozen. It does not have the drama of conflicts, the practical bite of best interests or the forensic joy of replacement advice.
But it is the foundation that says that advisers must comply with the law and the Code, and must not try to avoid or circumvent their intent. That is a simple obligation with broad consequences.
It means:
Advisers should stop looking for clever ways around obligations and start asking whether their conduct is consistent with the purpose of those obligations.
Licensees should supervise the substance of advice, not merely the appearance of compliance.
Disclosure, consent, scope and templates must be used honestly.
The adviser should be able to say: “I acted within the law. I complied with the Code. I did not try to work around the purpose of my obligations. Where the issue was uncertain, I recognised it, explained it and dealt with it properly.”
If the file supports that conclusion, Standard 1 is likely to be in reasonable shape. If it does not, the adviser may have produced a tidy file, but not necessarily a lawful one. And lawful is only the beginning.
Does your file show judgment, or just completion?
Review a sample of recent advice files and ask whether an independent reviewer could identify:
why the scope was appropriate;
how material risks and conflicts were managed;
what alternatives were considered; and
why the recommendation was consistent with the purpose of the adviser’s obligations.
If those conclusions depend on assumptions rather than recorded evidence, the file may demonstrate process without demonstrating Standard 1.
Next steps: Ask Assured Support about a targeted review of scope, disclosure, reasoning and file evidence.
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Does complying with the Corporations Act automatically mean an adviser has satisfied Standard 1?
No. Standard 1 requires advisers to comply with both the law and the intent of the law, including the Financial Planners and Advisers Code of Ethics 2019. A file may satisfy technical legislative requirements yet still fall short if the adviser has structured the engagement to avoid foreseeable obligations or relied on procedural compliance rather than professional judgement.
This distinction matters because ethical obligations frequently extend beyond prescriptive legislative requirements. Standard 1 examines whether an adviser has acted honestly, exercised independent judgement and addressed material issues rather than merely documenting compliance. For example, obtaining a signed client acknowledgement or providing a disclosure document does not, of itself, demonstrate that a conflict has been managed, that advice is appropriate or that the client genuinely understood the implications.
From a governance perspective, licensees should therefore supervise more than document completion. Review processes should test whether the advice demonstrates reasoned decision-making, appropriate scoping, consideration of foreseeable issues and evidence that the adviser acted consistently with the purpose of their obligations rather than the minimum wording of the law.
How should advisers determine which laws are “applicable” under Standard 1?
Standard 1 requires advisers to identify and consider all laws that are materially relevant to the advice being provided, not merely those traditionally associated with financial advice. Which obligations apply depends on the client’s circumstances, the subject matter of the advice and the legal consequences of the recommendation.
In practice, this may extend beyond the Corporations Act to include superannuation legislation, taxation consequences, privacy obligations, anti-money laundering requirements, trust law, estate planning issues or social security considerations where those matters materially affect the advice. The obligation is not to become a specialist in every discipline, but to recognise where another legal framework influences the recommendation and where specialist input is required.
Operationally, this means advice files should clearly record significant legal assumptions, identify issues referred to external specialists and explain why particular matters fall inside or outside the engagement. This demonstrates that potentially relevant legal issues were consciously assessed rather than overlooked.
What evidence would demonstrate that an adviser acted consistently with the intent of Standard 1?
A defensible advice file should demonstrate why decisions were made, not merely what documents were completed. Evidence of ethical judgement is often found in the reasoning that connects client objectives, identified risks and the recommendation ultimately provided.
For example, reviewers should expect to see why the agreed scope remained appropriate after fact-finding, how foreseeable issues were considered, whether material alternatives were evaluated, how conflicts were addressed and why limitations were unlikely to prejudice the client’s interests. Where judgement calls were required, the reasoning should be recorded rather than assumed.
For Responsible Managers and compliance teams, this shifts review activity away from checklist completion towards evaluating the quality of professional reasoning. File review programs that assess only document presence may confirm procedural compliance while missing weaknesses in judgement that ultimately expose both advisers and licensees to greater regulatory risk.
When does legitimate advice scoping become an attempt to avoid the intent of Standard 1?
Scoping becomes problematic when it is used to exclude issues that are reasonably foreseeable and materially connected to the advice rather than to define a genuinely limited engagement. A client may legitimately narrow the subject matter of advice, but that does not permit an adviser to ignore consequences that arise directly from the recommended strategy.
For example, excluding insurance considerations from a superannuation rollover may be reasonable only if existing insurance arrangements have first been identified and their consequences appropriately considered. Similarly, restricting advice to implementing an SMSF strategy does not remove the need to assess whether the client has the resources, understanding or circumstances necessary for that strategy to be suitable.
Practically, advisers should document why excluded matters are genuinely outside scope, what material consequences were nevertheless considered and whether additional advice or specialist assistance was recommended. The scope should reflect the client’s needs—not the convenience of the advice process.
Can compliance technology demonstrate compliance with Standard 1?
No. Technology can provide evidence that processes were followed, but it cannot substitute for professional judgement. Compliance platforms, workflow tools and document automation strengthen consistency, improve record keeping and assist supervision, yet they remain tools rather than decision-makers.
A workflow may confirm that disclosures were issued, conflicts recorded and acknowledgements obtained, but those records alone do not establish that the adviser exercised independent judgement or acted consistently with the purpose of the law. Human assessment remains essential where recommendations involve balancing competing client interests, interpreting incomplete information or deciding whether apparently compliant conduct is ethically appropriate.
For licensees implementing regtech solutions, governance should therefore distinguish between evidence that a control operated and evidence that the control was effective. Surveillance programs should continue testing adviser reasoning, judgement quality and decision-making rather than relying solely on workflow completion statistics or dashboard metrics.
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Standard 1: Acting in Accordance With the Law
By
Ben Moffatt
Advice Governance, Articles
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