The ASIC has raised serious concerns over the compliance standards of REs overseeing managed investment schemes, after a targeted review found major shortcomings in how regulatory obligations are being addressed.
According to Financial NewsWire, in its latest surveillance effort, ASIC reviewed 50 compliance plans underpinning the operations of 1,471 managed investment funds. The regulator revealed that most of these documents failed to meet essential requirements under three key regulatory regimes: the design and distribution obligations (DDO), internal dispute resolution (IDR), and reportable situations.
According to ASIC, these compliance plans are fundamental to safeguarding retail investors by mandating REs to methodically outline their legal obligations and the controls in place to meet them. However, many of the plans reviewed did not sufficiently outline how REs comply with core obligations, and in some cases, did not address them at all.
ASIC commissioner Alan Kirkland 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.”
He added, “It is concerning that some plans even failed to address DDO at all, suggesting they haven’t been meaningfully reviewed since 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 is now urging REs to urgently revisit their compliance plans in light of the findings and adopt better practices already demonstrated by some operators in the sector. ASIC has already written to several REs regarding its concerns and is currently investigating others for potential breaches of their legal obligations.
“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.
This latest review marks a renewed focus on regulatory enforcement in Australia’s managed investment landscape and serves as a warning to market participants to proactively ensure governance and documentation standards meet legal expectations.
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