ASIC’s SQM lawsuit puts fund ratings industry under the microscope
The corporate watchdog has put ratings houses on notice, shining a light on the industry’s pay-to-play business model.
Fund ratings agencies are on high alert over conflict-of-interest concerns as the corporate watchdog takes on a first-of-its-kind case, suing SQM Research for misleading reports on the now-collapsed Shield Master Fund.
Zenith group head of research Grant Kennaway said the Australian Securities and Investments Commission’s (ASIC’s) proceedings against SQM mean that research houses “cannot fail to be aware of the great scrutiny being applied by not just regulators, but also the market”.
FundMonitors chief executive Chris Gosselin told Capital Brief that ratings and research houses paid by fund managers were now on notice, given the irrevocable conflict of interest.
“It’s difficult to argue that there isn’t a conflict of interest if you’re being paid by the people that you are rating,” Gosselin said.
