ASIC financial adviser exam, Code of Ethics: values and ethical behaviour (Standards 1–3) question: nothing in the arrangement breaches Chapter

ASIC examCode of Ethics: values and ethical behaviour (Standards 1–3)

Nikolai Petrov, an adviser at Saltbush Financial, recommends that Mr Reyes, 52, keep his retail super fund, whose issuer is Saltbush's parent company. Saltbush's lawyers say nothing in the arrangement breaches Chapter 7. The fund suits Mr Reyes, but a cheaper fund with the same features is available. The Code says it 'imposes ethical duties that go above the requirements in the law'. Nikolai's recommendation is BEST described as one that…

A is consistent with the Code once the ownership link is disclosed in the SOA
B raises a Code issue for Saltbush but generally not for Nikolai personally
C is a matter for Saltbush's compliance policy, not the Code
D can breach Standards 2 and 3 even though it complies with Chapter 7

Show the answer and explanation

Answer: D. can breach Standards 2 and 3 even though it complies with Chapter 7

The Code of Ethics 2019 imposes duties above the law (cl 5). Standard 2 requires Nikolai to act in Mr Reyes's best interests, which a dearer fund with the same features may not serve, and Standard 3 prohibits acting under a conflict, here a product issued by his licensee's parent. Chapter 7 compliance settles the legal question only. Disclosure in the SOA is required, but it does not cure a Standard 3 conflict. The Code binds Nikolai personally (Corporations Act 2001 s921E, compilation 19 Sep 2026), whatever Saltbush's own exposure. A compliance policy can add to the Code but cannot replace it.

Common mistake

Lawful under Chapter 7 does not mean compliant with the Code.

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