ASIC has today provided an overview of some compliance issues identified during its proactive surveillance of responsible entities and superannuation trustees that are also holders of an Australian financial services (AFS) licence.
On the 15th of September 2015, ASIC Commissioner Peter Kell said that while some compliance issues were expected, there were some areas where processes and behaviours could be improved across the board.
‘ASIC urges all licensees to take stock and implement any measures that are necessary to meet both legal obligations and good practice within the industry’, Mr Kell said.
For responsible entities, the notable compliance concerns included:
1. defective or misleading disclosure and advertising material and an absence of effective controls over the authorisation and review of promotional materials and disclosure documents.
ASIC expects licensees to develop, maintain and comply with documented processes dealing with the authorisation and review of promotional materials.
2. deficiencies in compliance and governance frameworks, including: inadequate internal processes, failures to comply with established internal procedures, inconsistencies between funds’ governing documents and internal policies, as well as inadequate record keeping to demonstrate compliance with licensee obligations.
ASIC expects licensees to document their compliance measures, fully implement them and monitor and report on their use and regularly review the effectiveness of these measures and ensure they are up-to-date. In ASIC’s view, failure to do this will make it more difficult to comply with the general obligations and to demonstrate compliance with them.
3. in a small number of cases, absence of an appropriate monitoring processes to ensure that returns information of a licensees’ funds, published by third party data aggregators, are consistent with the returns published by the responsible entity. This led to discrepancies between returns information available from these third party service providers and those published by the responsible entities.
ASIC expects licensees to have periodic reconciliation controls on returns to monitor and resolve any material discrepancies.
As a result of the compliance failures and areas of concern that were identified during the reviews, ASIC has required both responsible entities and trustees:
- to amend and update compliance measures,
- to develop procedures such as those related to the due diligence and authorisation of disclosure documents and promotional material,
- who are responsible entities, to make changes to their risk management arrangements and implement additional measures to monitor the reporting of returns.
- to withdraw disclosure documents and marketing materials, and
- to issue revised or supplementary disclosure.
The surveillance program of responsible entities also resulted in a number of regulatory outcomes, including the imposition of additional AFS licence conditions in one case and more broadly, amendments and improvements in the quality of licensees’ compliance arrangements and governance frameworks.
‘ASIC will continue to conduct reviews of licensees in the superannuation and managed investments sector to assess compliance with their AFS licence obligations, rectify any deficiencies and to improve overall industry standards’, Mr Kell said.
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