Principles of Professional Practice in the Financial Services Industry Essay Example

Apply Principles of Professional Practice to Work in the Financial Services Industry


  1. What are the three main ‘arms’ of the government’s regulation of the financial sector?

  • Legislative

  • executive and

  • Judicial.

Name six regulating bodies in the financial services sector, and briefly state the main role of each.

  • Auditing and Assurance Standards Board (AUASB)- Develops high quality auditing and assurance standards and related auditors and providers guidance of other assurance services.

  • Australian Accounting Standards Board (AASB)- Develops and maintains starndards of financial reporting applicable to private and public sector companies in Australian economy.

  • Australian Prudential Regulation Authority (APRA)- Oversees and regulates, friendly societies, reisurance companies, superannuation industry members, building societies, credit unions, general insurance and banks

  • Australian Securities and Investments Commission (ASIC)- Enforces and regulates laws of financial and company to protect creditors, investors and consumers of Australia.

  • Australian Transaction Reports and Analysis Centre (AUSTRAC)- Passes information to other agencies of the government to help it act against welfare fraud, organised crime, tax evasion and money laundering.

  • Financial Reporting Council (FRC)- Fosters investment by promoting corporate governance and report of high quality.

Which organisation monitors compliance with industry codes of practice? Australian Securities and Investments Commission (ASIC)

2. What does ‘prudential regulation’ mean? Do ASIC and APRA have the power to seize documents? Which government department controls the ATO, the ACCC, APRA and ASIC?

Prudential regulation is the regulation of institutions taking deposits and supervising their conduct and set down requirements that limit their risk-taking. It ensures the depositor’s funds safety and stabilizes the financial system.

ASIC and APRA have the power to inspect the documents provided and obtains a reasonable time frame to comply with their notice, failure of which they have powers to obtain a warrant of seizing the documents.

ATO, ACCC, APRA and ASIC are controlled by Finance and Deregulation Department.

  1. Is the ASX a company? What kind of disciplinary action can the ASX take against companies for breaches of its rules?

ASX is not a company but a stock exchange of Australia which functions as a payment system facilitator, clearing house and market operator. It also ensures that corporate governance standards among Australia’s listen companies are adhered to. ASK may take a disciplinary action against companies in breach of its Listing Rules by de-listing them or suspending their securities from quotation.

  1. What are the main aims of a professional body?

  • To safeguard the interests of the public (Giving them legitimacy).

  • Represent professional practitioners’ interests.

  • Represents its own self-interests to maintain its powerful position and privileged as a controlling body.

Name three professional bodies in the financial services sector. Is membership of professional bodies voluntary or compulsory?

  • Financial Services Institute of Australasia (FINSIA)

  • National Institute of Accountants (NIA)

  • Association of Accounting Technicians

The membership of these professional bodies is voluntary and no one is forced to join them.

5. What are the main functions of a treasury? What are the main functions of the Department of Finance?

The functions of a treasury are as follows:

  1. Ensures there is sound macroeconomic environment by monitoring and assessing economic prospects and conditions in Australia and abroad and provides the best advice in formulating and implementing effective macro-economic policy

  2. Ensure that government spending and taxation arrangements are done effectively.

  3. Ensure that arrangement of retirement income and taxation is done effectively.

  4. Ensure that markets functions well.

Functions of the Department of Finance are as follows:

  1. Provides quality services and advice to ensure the facilitation of Government’s objectives achievement.

  2. Operate in management of government building works and projects, management of procurement of shared corporate services, goods and services, collection of subsidy schemes, grant and revenue.

  3. Provides strategic advice on capital investment programs of the major trading enterprises of the government.

  1. Name two industry codes of practice. Who develops industry codes of Practice? Who monitors compliance with industry codes of practice?

  1. Code of Banking Practice- This was developed by Australian Banker’s Association (ABA).

  2. General Insurance Code of Practice- This was developed by Insurance Council of Australia

Australian Securities & Investment Commission (ASIC) monitors compliance with industry codes of practice

  1. What is the aim of the Corporations Act? Who administers the Corporations Act? What does ‘corporate governance’ mean?

Corporations Act establishes laws dealing with business organizations in Australia like companies, managed investment skills and partnerships. It regulates the formation and operation of corporations, fundraising, takeovers and duties of officers.

It is administered by the Attorney-General’s, Treasury

Corporate governance is the set of processes, institutions, laws, policies and customs that affect the way a company is administered, directed and controlled. Individuals are accountable to their actions which reduces company-customer problems. Corporate governance is also relationships of stakeholders (shareholders, suppliers, creditors, debtors, communities and customers, executives, board of directors and employees) and the goals that govern a company and how they are affected by the company’s activities.

  1. Name three Acts relevant to the financial services sector.

  • Financial Management and Accountability Act 1997

  • Financial Services Reform Act 2001

  • Australian Financial Institutions Commission Act 1992

Name two websites useful for finding information on financial sector organisations.




1. Visit the ASIC website ( or search for ‘asic’) to answer the following questions.

  1. What advice does ASIC offer to people who want to complain about a financial service (for example, superannuation financial advice, insurance or credit)?

  • superannuation

  • managed funds

  • insurance

  • Deposit accounts.

  1. What types of complaints does ASIC deal with?

  • Financial scams

  • Financial service, advice or product

  • Companies

  • Consumer credit

  • Consumer goods, non-financial services, residential tenancy

  • Prices, competition, unfair market practices, product safety, franchises, advertising and debt collection in relation to non-financial services

  • Financial management of banks, other financial institutions, superannuation funds or insurance companies

  • Your employer, wages and conditions

    1. Have a look at some ASIC information sheets and submit your summary of understanding.

  • The ASIC information sheets on insolvency helps an individual if affected by the insolvency of the company and has no or little knowledge of what is involved. The sheets provide shareholders, employees, directors and directors with basic understanding of liquidation, voluntary administration and receivership which are the three most common company insolvency procedures.

  • The information sheet (INFO 107)-Guidelines for managing allegations of misconduct against ASIC officers. This describes the guidelines used to ensure that complains on conduct of ASIC staff members are done in connection with ASIC regulatory, and that investigation of enforcement work is done promptly and fairly. It ensures that through guidelines, the staff members maintain high professional standards of conduct and behaviour while undertaking their duties.

    1. Look at some recent ASIC press releases and submit your summary of understanding.

11-186MR ASIC releases new advertising guidelines- Tuesday 30 August 2011

ASIC released a draft regulatory guide and consultation paper containing advertising best practice guidance for financial advice and financial products. It sought to promote investors and financial consumers who were informed and confident noting that advertising plays an important role in helping investors to make important financial decisions.

11-185AD Former Australian Capital Reserve directors plead guilty- Monday 29 August 2011
In this release, three Australian Capital Reserve Limited’s (ACR) former directors had pleaded guilty to charges relating to misleading or false statements in the accounts of the company and a prospectus provided by ASIC, in New South Wales District Court.

    1. Look up ASIC’s consumer website, FIDO, and find the page about finding unclaimed money.

  1. Go to the APRA website ( to answer the following questions.

      1. What is the ‘prudential regulation’?

This is the regulation of institutions taking deposits and supervising their conduct and set down requirements that limit their risk-taking. It ensures the depositor’s funds safety and stabilizes the financial system.

      1. What are APRA’s vision and mission?

To be a world class integrated prudential supervisor recognized for its leadership, professionalism and innovation.

To establish and enforce prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by institutions we supervise are met within a stable, efficient and competitive financial system.

      1. Have a look at some media releases by APRA and submit your summary of understanding.

APRA accepts enforceable undertaking from former Trio director- 19 Sep 2011Page Content

The Australian Prudential Regulation Authority (APRA) announce that it has accepted an enforceable undertaking from a former director of Trio Capital Limited (Trio) Keith Finkelde, a former licensed trustee of fiver registered superannuation entities. Keith has accepted APRA’s concerns for his failure to properly carry out his duties as a director of a superannuation trustee.

APRA releases consolidated prudential standards- 12 Sep 2011

The Australian Prudential Regulation Authority (APRA) released four prudential standards in final form on outsourcing, propriety and fitness, governance and business continuity management. The 12 existing standards across the Authorized Deposit-taking (ADI), life insurance industries and general insurance will be replaced by these standards

  1. Go to the RBA’s website ( to answer the following questions.

      1. What is ‘monetary policy’?

Monetary policy is the process by which a country controls the supply of money through its central bank targeting interest rates with the aim of promotion economic stability and growth.

      1. Who is currently Governor of the RBA?

Glenn Stevens

      1. What rate of inflation does the RBA try to achieve? 2-3%

      1. What is the current inflation rate? 3.6%

  1. Go to the ACCC website ( and look under Consumer Protection to answer the following questions.

    1. What is the main feature of the ACCC’s consumer protection provisions?

It aims at protecting consumers against products suppliers’ misleading conduct. It deals with conditions and warranties, product liability, product safety and information, unfair practices and actions against manufacturers or importers.

    1. Look at some recent press releases of the ACCC to get an idea of its consumer protection activities and submit your summary of understanding.

ACCC puts energy retailers on notice over door-to-door practices- 13th September 2011

The Australian Competition and Consumer Commission’s Chairman Rod Sims announced the commission’s plan to establish door-to-door sales practices in the retail energy sector. The ACCC concern is on the deceptive and misleading conduct by marketers who do door-to-door marketing targeting consumers who are vulnerable like the elderly. The ACCC warned that industries misleading consumers about retail energy products will be penalized severely.

ACCC takes action over ‘free to roam’ chicken claims-7th September 2011

The Australian Competition and Consumer Commission has established proceedings alleging deceptive and misleading conduct in the Federal court relating to supply and promotion of chicken products. An action against Baiada Poultry Pty Ltd and Bartter Enterprises Pty Ltd is taken by the ACCC and alleged that the two companies made misleading and false claims in product packaging and print advertising that Steggles meat chickens roam freely with the substantial space available in the barns.

  1. Go to the ASX website (, or search for ASX) to answer the following questions.

    1. The ASX is a listed company. What is a listed company?

A listed company is a company whose shares have been ‘quoted’ on a stock exchange for public trading.

    1. What is a float?

A float is the total number of outstanding shares or stock of a company available on the stock market. A float that is at a lower level means it is highly volatile since its market price can dramatically be affected by every sale of stock or big purchase.

    1. What is continuous disclosure?

This is the periodic updating of financial and other information required by a bond issuer through an official document. A listed company is required to announce any information known to the issuer concerning its associated companies, about it or its subsidiaries, which can avoid false market in the securities of the company or which would affect materially the price of value of price of its securities.

    1. What is insider trading?

Insider trading is a term used by many investors which is associated with illegal conduct. However, it includes both illegal and legal conduct. When corporate insiders like employees, directors and officers buy and sell stock in their own companies (trade in their securities) and report their trades to the stock exchange, it is term as legal. When buying and selling of securities is done in breach of a relationship of confidence and trust while possessing non-public information and material about the security is termed as illegal.

    1. Use the Market Statistics option to find out the national top 10 most traded stocks for the week just ended:

        1. by volume


GICS Industry Group


Food Beverage & Tobacco





Telecommunication Services





Telecommunication Services












$ Value Traded

GICS Industry Group


Food Beverage & Tobacco


















Telecommunication Services



  1. Many organisations in the industry use the expression “best practice”. What does “best practice” mean?

A ‘best practice’ varies from organization to organization and from department to department and so on. A ‘best practice’ is an idea of coming up with a process, method or technique that is more effective in delivering a result than any other process, method or technique.

  1. Go to the Budget website at (or select the budget option from the Treasury website, and have a look at the contents of the budget.

  1. How much did Australia spend on foreign aid in the last financial year? $4.8b

  1. Who is the Australian Treasurer? Wayne Swan

  1. Who is the Minister for Finance and Administration?
    Senator the Hon Penny Wong

  1. Do you think it is reasonable for the government to place a requirement on fund managers to invest only in ethically and environmentally sound funds?

Yes. This is because many customers are ready to pay more for environmentally responsible services and products and investments are bound to bore profits. Ethical investment will create a sustainable environment.

If the legislation does cause lower profits, is that a fair price to pay for preserving standards of ethics and protecting the environment?

Yes. Because profits cannot be compared to a higher price that the country, companies and individuals have to pay for a deteriorating environment.

Would you be prepared to receive lower rates of interest on your superannuation in the interests of these requirements? Explain your answer.

Yes I would. This is because I advocate for environment sustainability and I’d rather receive lower rates and incur no other cost in my retirement caused by unsustainable environment.

  1. Find three news articles about the financial services sector in Australia. The articles should include reference to one of the regulating bodies or professional bodies or Acts. Discuss the articles and how they relate to the information on regulation and reform of the financial sector.

ASIC permanently bans insurance agent Article: st1

The Australian Securities and Investments Commission (ASIC) banned an insurance agent from Tasmania permanently because of fraud offences. He was charged of stealing and acquiring a financial advantage dishonestly. Under the Corporation Act 2001, ASIC has authority to ban a persona convicted of fraud from providing financial services.

2nd Article: Superannuation industry bodies welcome changes

The Association of Superannuation Funds of Australia (ASFA) has embraced reforms that would help the industry cope with employee issues of changing jobs regularly. This will enable the industry to deliver transparent information to consumers on the achievement of performance and what members are paying for.

3rd Article: Six-year APRA ban for Trio director

The Australian Prudential Regulation Authority (APRA) has barred Keith Finkelde , former director of Trio Capital from acting as a custodian or as a trustee investment manager of an APRA-regulated super fund for 6 years. APRA claimed that Finkelde failed to carry out his duties properly.


Kennedy, C. (2011). Six-year APRA ban for Trio director. Money Management. Reed Business Information. Accessed on 23rd September, 2011, from < director>

Stewart, T. (2011). Superannuation industry bodies welcome changes. Super Review. Reed Business Information. Accessed on 23rd September, 2011, from < bodies-welcome-changes/531773.aspx

Tsanadis, A. (2011). ASIC permanently bans insurance agent. Money Management. Reed Business Information. Accessed on 23rd September, 2011, from < permanently-bans-insurance-agent>