Australia’s corporate regulator has found widespread shortcomings in the compliance plans of responsible entities overseeing close to $1 trillion in managed investments, raising concerns about governance across a large swathe of the funds management sector.
In a review of 50 compliance plans used in operating 1,471 registered managed investment schemes, ASIC said most plans did not adequately address key requirements under the design and distribution obligations (DDO), internal dispute resolution (IDR) and reportable situations (RS) regimes.
ASIC Commissioner Alan Kirkland said compliance plans are central to protecting retail investors by setting out how responsible entities identify their obligations and the measures they will apply to meet them. ‘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 said some plans did not address DDO at all, indicating they may not have been meaningfully reviewed since the regime began in 2021. ‘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 regulator urged responsible entities to move quickly to fix gaps, take account of the review’s findings and consider examples of better practice identified among peers. It has written to some responsible entities about its concerns and is investigating others for potential breaches.
‘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,’ Commissioner Kirkland added.
The 50 organisations reviewed operate 45% of all registered managed funds and hold 47% of the roughly $2 trillion in assets in the registered managed fund sector. Under the Corporations Act 2001, responsible entities must maintain a compliance plan for each registered scheme as a reference for the responsible entity, its staff, its auditor and ASIC. The plans should identify all obligations, set out adequate controls to address each, and be diligently implemented. ASIC warned that if plans are inadequate or not put into practice, investors may be deprived of the full protections intended under the Act.
