ASIC hits managed investment scheme compliance

The Australian Securities and Investments Commission (ASIC) has fired a shot over the bows of the managed investment sector, accusing it of failing to maintain adequate compliance plans.

ASIC said it had assessed 50 compliance plans used by responsible entities in the operation of a combined 1,471 funds and found that most of the plans failed to adequately address the most important requirement across the design and distribution obligation, internal dispute resolution and reportable situations regimes.

ASIC Commissioner Alan Kirkland said compliance plans play a fundamental role in the regulatory framework designed to protect retail investors, by requiring REs to identify all their compliance obligations and methodically set out adequate measures to address each of 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.

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.”

ASIC is calling on REs to swiftly address inadequacies and gaps in their compliance plans, including by taking account of the key findings in ASIC’s review and considering examples of better practices employed by some REs.

ASIC has written to some REs about its concerns with their compliance plans and is 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,” Kirland said.