The responsible entities (REs) of a combined total of nearly $1 trillion in managed investments are failing to maintain adequate compliance plans, an ASIC review published today has found.
ASIC assessed 50 compliance plans used by REs in the operation of a combined 1,471 funds and found that most of the compliance plans failed to adequately address the most important requirements across the design and distribution obligation (DDO), internal dispute resolution (IDR) and reportable situations (RS) 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,' Commissioner Kirkland added.
Background
The 50 participants in ASIC's review operate 45% of all registered managed funds and hold 47% of the approximately $2 trillion value of all registered managed fund sector assets.
REs must develop and maintain a compliance plan for each registered managed investment scheme funds they operate. The intention is that these plans area documented reference for each fund's RE, its staff, its auditor,and ASIC of the measures REs will apply to ensure compliance with their obligations under the Corporations Act 2001 (Act).
These RE obligations are designed to protect fund members. Therefore, it is vital that REs identify all their obligations,set out the adequate control measures they have developed to address each obligation, and diligently implement those controls.
If a compliance plan is not adequate and implemented, fund investors will not have the benefit of the full range of intended protections under the Corporations Act 2001.
More Information
Review of managed fund compliance plans: 'Failing to plan is planning to fail'
