Australia’s
financial market watchdog has uncovered significant compliance failures across
the managed investment sector, with responsible entities overseeing nearly $1
trillion in assets failing to maintain adequate oversight plans.
The
Australian Securities and Investments Commission (ASIC) examined 50 compliance
plans covering 1,471 funds and discovered widespread deficiencies in how fund
managers address key regulatory requirements. The review encompassed entities
managing 45% of all registered managed funds, representing 47% of the sector’s
approximately $2 trillion in total assets.
The
examination revealed that most compliance plans inadequately addressed three
crucial regulatory areas: design and distribution obligations, internal dispute
resolution procedures, and reportable situations requirements. These
frameworks, introduced or enhanced in October 2021, form the backbone of
investor protection measures.
Alan Kirkland, Commissioner at ASIC, Source: LinkedIn
ASIC
Commissioner Alan Kirkland highlighted the severity of the findings, noting
that some plans completely failed to address design and distribution
obligations. This suggests certain entities have not meaningfully updated their
compliance frameworks since the new requirements took effect nearly four years
ago.
“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,” Kirkland commented.
Previous ASIC news: Expert Used “Psychological Bullying” to Take $940K from Forex Investors. Now He’s Going to Prison
Widespread Compliance Gaps
The
regulator found that treatment of design and distribution obligations showed
the poorest compliance among the three regulatory areas examined, followed by
internal dispute resolution requirements. Some entities had incorrectly relied
on compliance plans from different responsible entities, leaving their funds
without substantive oversight frameworks.
ASIC has
initiated direct communication with several responsible entities regarding
compliance plan deficiencies and launched investigations into potential legal
violations. The regulator emphasized that existing guidance has been available
to help entities maintain adequate compliance plans, making the scale of poor
practice inexcusable.
The
findings raise broader concerns about governance arrangements within the
managed investment industry. Compliance plans serve as documented references
for fund operators, staff, auditors, and regulators to ensure adherence to
legal obligations under the Corporations Act 2001.
Investor Protection at
Risk
The
compliance failures potentially expose retail investors to harm, as these plans
are designed to protect fund members through systematic identification and
management of regulatory obligations . When compliance plans prove inadequate or
poorly implemented, investors lose the full range of intended protections under
corporate law.
ASIC has
called for swift remediation of identified gaps and inadequacies across the
industry. The regulator plans continued monitoring of compliance plan quality
beyond the specific obligations examined in this review.
“We will
continue to monitor the quality of compliance plans going forward. This review
will not be limited to the obligations we examined in our recent surveillance,”
Kirkland said.
The managed
investment sector oversees retirement savings and investment portfolios for
millions of Australians, making effective compliance and oversight critical for
financial system stability and investor confidence.
Australia’s
financial market watchdog has uncovered significant compliance failures across
the managed investment sector, with responsible entities overseeing nearly $1
trillion in assets failing to maintain adequate oversight plans.
The
Australian Securities and Investments Commission (ASIC) examined 50 compliance
plans covering 1,471 funds and discovered widespread deficiencies in how fund
managers address key regulatory requirements. The review encompassed entities
managing 45% of all registered managed funds, representing 47% of the sector’s
approximately $2 trillion in total assets.
The
examination revealed that most compliance plans inadequately addressed three
crucial regulatory areas: design and distribution obligations, internal dispute
resolution procedures, and reportable situations requirements. These
frameworks, introduced or enhanced in October 2021, form the backbone of
investor protection measures.
Alan Kirkland, Commissioner at ASIC, Source: LinkedIn
ASIC
Commissioner Alan Kirkland highlighted the severity of the findings, noting
that some plans completely failed to address design and distribution
obligations. This suggests certain entities have not meaningfully updated their
compliance frameworks since the new requirements took effect nearly four years
ago.
“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,” Kirkland commented.
Previous ASIC news: Expert Used “Psychological Bullying” to Take $940K from Forex Investors. Now He’s Going to Prison
Widespread Compliance Gaps
The
regulator found that treatment of design and distribution obligations showed
the poorest compliance among the three regulatory areas examined, followed by
internal dispute resolution requirements. Some entities had incorrectly relied
on compliance plans from different responsible entities, leaving their funds
without substantive oversight frameworks.
ASIC has
initiated direct communication with several responsible entities regarding
compliance plan deficiencies and launched investigations into potential legal
violations. The regulator emphasized that existing guidance has been available
to help entities maintain adequate compliance plans, making the scale of poor
practice inexcusable.
The
findings raise broader concerns about governance arrangements within the
managed investment industry. Compliance plans serve as documented references
for fund operators, staff, auditors, and regulators to ensure adherence to
legal obligations under the Corporations Act 2001.
Investor Protection at
Risk
The
compliance failures potentially expose retail investors to harm, as these plans
are designed to protect fund members through systematic identification and
management of regulatory obligations . When compliance plans prove inadequate or
poorly implemented, investors lose the full range of intended protections under
corporate law.
ASIC has
called for swift remediation of identified gaps and inadequacies across the
industry. The regulator plans continued monitoring of compliance plan quality
beyond the specific obligations examined in this review.
“We will
continue to monitor the quality of compliance plans going forward. This review
will not be limited to the obligations we examined in our recent surveillance,”
Kirkland said.
The managed
investment sector oversees retirement savings and investment portfolios for
millions of Australians, making effective compliance and oversight critical for
financial system stability and investor confidence.