New ASIC Guidance for the Fund Management Industry – Push on Compliance

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The Australian Securities & Investments Commission (ASIC) has just released a batch of guidance for fund management in Australia.[1] In today’s update we offer a quick breakdown of the seven guidance documents. The seven guidance documents square the existing regulatory framework under the Corporations Act 2001 with the new ‘Asia Region Funds Passport’.[2] This is a multilaterally agreed framework for the cross-border marketing of managed funds across the Asia Region.

Our take — compliance is everything. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry demonstrated that in spite of massive institutional compliance departments, and huge spends, a ‘compliance culture’ is non-existent in some businesses. [3] With deliberate attempts of senior management in some businesses to hide wrongdoing from ASIC it is fair to say that a ‘non-compliance culture’ exists.

By Dr Drew Donnelly, Compliance Quarter.

The Regulatory Guides

Seven guides were released in total. We briefly summarise each one:

  • RG 131 Funds management: Establishing and registering a fund sets out the requirements for (a) registering as a managed investment scheme and (b) registering as a passport fund;
  • RG 132 Funds management: Compliance and oversight sets out the key compliance obligations of managed investment schemes. This includes the requirement to have a compliance management system and risk management program, designed in light of the applicable Australian Standards. It has a particular emphasis on oversight and governance of the compliance program within the organisation, including systematic audit of compliance programs;
  • RG 133 Funds management and custodial services: Holding assets sets out the requirements for asset custodial arrangements. It focuses on businesses that have arrangements with third parties to hold assets, having compliance controls in place and ensuring funds have the appropriate legal set-up (usually a trust);
  • RG 134 Funds management: Constitutions gives guidance on constitutions for those who run managed investment schemes (‘responsible entities’) and passport fund operators;
  • RG 136 Funds management: Discretionary powers sets out ASIC’s approach to granting individual relief from Corporations Act 2001 requirements, and where relevant, the Australian Passport Rules;
  • RG 137 Constitution requirements for schemes registered before 1 October 2013;
  • RG 138 Foreign passport funds establishes the requirements for foreign passport fund operators seeking to enter, or operating in, Australia under the Asia Region Funds Passport scheme.

Comment

There is ongoing frustration from regulators with organisations that take a ‘set and forget’ approach to compliance. It is not enough to simply establish good policies and expect compliance. We are seeing this dissatisfaction across the board, not just in banking and financial services, but also in energy retail, utilities and property management. Organisations need to demonstrate an ongoing commitment through:

  • integration of compliance management throughout the organisation’s functions (i.e. don’t just leave it to the compliance lead and their team);
  • continuous improvement of organisational policies (e.g. ensuring that customer complaints immediately/quickly inform policy updates)
  • Robust governance arrangements (e.g. regular Board involvement);
  • Regular audit and breach reporting (e.g. consider automated processes).

If you think we could be of assistance in supporting your financial services compliance through our automated compliance hub, document review or bespoke compliance management programs, please get in touch.

[1] See https://asic.gov.au/about-asic/media-centre/find-a-media-release/2018-releases/18-222mr-asic-updates-guidance-for-funds-management-industry/.

[2] For more information see http://fundspassport.apec.org/

[3] For more, see https://www.compliancequarter.com.au/three-financial-services-compliance-lessons-from-the-royal-commission/.

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