ASIC’s pointed updated illustrative examples of conflicts
The Australian Securities and Investments Commission has published illustrative examples of conflicts of interest many of which go to the heart of issues it has raised in the context of the Shield and First Guardian collapses.
The examples are contained in the updated Regulatory Guide 181 (RG 181) dealing with Licensing and Managing Conflicts of Interest and cites an adviser recommending that clients invest in financial products from a related entity, and a superannuation trustee, responsible entity or product issuer that owns a financial advice business permitting the business to recommend the owner entity’s products to clients.
As well, the updated regulatory guide also cites “a research analyst—influenced by their personal interests in holdings and proprietary business interests—compromising their independence in selecting a company for research, promoting the company or overstating the company’s prospects to clients, for the analyst’s own benefit”.
It also cites “a director or executive of a superannuation fund who is privy to price-sensitive information about fund transaction activities (such as the revaluation of an unlisted asset)—influenced by their personal and financial interests—using that information for personal gain by switching investment options based on their knowledge of the timing of that revaluation”.
Elsewhere in the updated guidance, ASIC also reinforces that “volume-based remuneration is typically conflicted”.
“You should ensure your remuneration practices, including any non-monetary benefits, comply with your conflicts management obligation. For example, you should:
(a) disclose commissions that are based on sales; and
(b) avoid remuneration structures where advisers only earn commission (i.e. where you pay no salary or other remuneration).”
“Disclosure can help to manage conflicts, but you should avoid (and not merely disclose or control) remuneration practices that create significant conflicts—particularly if they place your interests in direct conflict with clients or members,” the guide says.
“Volume-based remuneration is typically conflicted as it creates incentives to maximise sales at the expense of a client’s interests, but exceptions exist. You should ensure that any benefits align with the conflicts management obligation and any other relevant legal obligation (e.g. best interest duties),” it said.
The Regulatory Guide also makes the point that Managed Discretionary Accounts (MDA) and investor director portfolio services operators must “segregate custodial staff (and direct and indirect managers) from persons performing other functions in a way that minimises the potential for conflicts of interest between their duties and other functions; and use business structures that support minimising this conflict”.
ASIC noted that it had consulted on the updates to RG 181 between 30 July and 5 September with most feedback focused on technical details and specific guidance, such as the regulator providing illustrative examples.
ASIC fully aware of Industry Super Funds big wigs insider trading. Yet no fines, bans, public shaming or anything for ISFs. ASIC prove yet again their total Regulatory Capture Corruption with ISFs.
“a director or executive of a superannuation fund who is privy to price-sensitive information about fund transaction activities (such as the revaluation of an unlisted asset)—influenced by their personal and financial interests—using that information for personal gain by switching investment options based on their knowledge of the timing of that revaluation”.
Well said Regulatory Capture Corrupt ASIC & ISFs – totally agree, absolutely sickening the hypocritical bias on public display by ASICkjoke