ASIC financial adviser exam, Code of Ethics: client care and quality process (Standards 4–9) question: derive from a third party

ASIC examCode of Ethics: client care and quality process (Standards 4–9)

Tessa, a relevant provider, arranges a home building policy for her client, Omar, and the general insurer pays a commission. Standard 7 says: 'Except where expressly permitted by the Corporations Act 2001, you may not receive any benefits, in connection with acting for a client, that derive from a third party other than your principal.' Under Standard 7, Tessa may accept the commission only if…

A the Act expressly permits it, Omar gives informed consent and it is fair value
B it is paid to her licensee first and then passed on to her
C it is disclosed in the FSG she gives Omar before arranging the policy
D it is rebated in full to Omar's account once the policy starts

Show the answer and explanation

Answer: A. the Act expressly permits it, Omar gives informed consent and it is fair value

Standard 7 of the Financial Planners and Advisers Code of Ethics 2019 has three limbs that apply together: a benefit from a third party other than the principal is barred unless the Corporations Act expressly permits it; the client must give free, prior and informed consent to benefits; and fees and benefits must be fair, reasonable and value for money. All three must be met. Routing the commission through the licensee does not change that it derives from the insurer, a third party. Disclosure in an FSG is a separate legal duty and is not consent or a value assessment. Standard 7 does not require a rebate; it requires the three tests to be met. The Corporations Act 2001 (compilation 19 Sep 2026) deals with insurance commissions in s963B(1)(a) and s963BB.

Common mistake

Standard 7's third-party rule, consent and value for money are separate tests; meeting one does not meet the others.

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