The Government’s decision to set up a disciplinary system for financial advisers appears to have blindsided the industry, which had been preparing for the launch of its own monitoring scheme on January 1.

Plans by the industry to register Code Monitoring Australia (CMA) to oversee financial advisers’ compliance with the code of ethics published by the Financial Adviser Standards and Ethics Authority (FASEA) have subsequently been withdrawn.

The CMA was expected to monitor industry compliance with the code.

A statement on Friday from the office of Treasurer Josh Frydenberg says the new setup will replace “the role of code monitoring bodies” that were due to be established as part of professional standards reforms.

The proposed disciplinary system and single disciplinary body is one of the recommendations made by the Hayne royal commission into financial sector misconduct.

Treasury will immediately consult on the move and aims to have the new system ready in early 2021, subject to legislative approval.

It says financial advisers must still observe the code of ethics. In addition, the Australian Securities and Investments Commission is considering the steps needed to ensure licensees do not breach the law by not registering with a code monitoring body.

The industry has criticised the timing of the Government’s move, which comes just a month before financial advisers had to register with the now ditched CMA. The move has left it with no choice but to ditch the CMA.

“[The] announcement by the Government makes it unreasonable for us to proceed with CMA,” a joint letter by the six financial adviser bodies says. “We need to avoid adding complexity, further duplication and cost to the regulation of financial advice.”

“We are committed to ensuring that appropriate disciplinary procedures and consumer protections are in place but are disappointed that the announcement is so late in the development process.”

The six financial adviser groups in the joint letter are the Financial Planning Association of Australia, the Association of Financial Advisers, the Boutique Financial Planners, the Financial Services Institute of Australasia, the Self-Managed Super Fund Association and the Stockbrokers and Financial Advisers Association of Australia.