ASIC review finds widespread compliance failure in managed investment industry
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The news: The Australian Securities and Investments Commission (ASIC) says it has uncovered poorly maintained compliance plans across entities that collectively oversee nearly $1 trillion in managed investments.
The context: After reviewing the compliance plans of 50 entities, representing 45% of all registered managed funds, the corporate regulator said most did not adequately address the design and distribution obligation (DDO), internal dispute resolution (IDR) and reportable situations (RS) regimes.
ASIC has written to some responsible entities about concerns with their compliance plans — which should detail how entities will meet their Corporations Act obligations — and is investigating others for potential breaches of their legal obligations.
The treatment of DDO responsibilities was considered the poorest, followed by IDR requirements.
The regulator also noted that there were some plans that left at least one of the obligations unaddressed, suggesting they hadn't been reviewed since 2021.
While ‘master compliance plans’ are permitted for use across multiple funds if they are operated by the same responsible entity, there were some that wrongly relied on plans operated by different entities.
Although compliance plan audits were beyond the scope of the review, ASIC found that none of the 23 auditors that covered the reviewed compliance plans had issued qualified audit reports relating to ASIC’s areas of concern over the last three audit cycles.
What they said: “These plans set out how responsible entities comply with the law, yet many plans we reviewed failed to adequately set out compliance with important regulatory obligations. Failing to plan is planning to fail,” ASIC commissioner Alan Kirkland said.
“ASIC has provided long-standing guidance to help REs maintain adequate compliance plans. There is no excuse for the scale of poor practice we have identified. In ASIC's view, these types of deficiencies raise concerns that governance arrangements are lacking.”
The source: ASIC media release
