Frozen fund fallout prompts calls for regulatory overhaul
The serious potential for fund illiquidity, as demonstrated by the recent van Eyk experience, warrants major regulatory reform, with frequent status updates and a re-evaluation of responsible entities' liability.
Such is the opinion of analyst Greg Hogan, who calls for an overhaul of how the system addresses frozen funds in a submission to the Financial System Inquiry (FSI).
Using van Eyk and Macquarie's experience as a catalyst, Hogan says regulators should re-evaluate how much responsibility responsible entities take when a fund becomes illiquid.
While stressing that he attributes no blame or accusation of wrongdoing for the incidents that led to the suspension of redemptions for four van Eyk funds, he says the impact of ‘illiquidity scenarios' on the continuing viability of the van Eyk Blueprint International Shares Fund should have been considered.
He suggested a continuous-disclosure-like regime, as opposed to a breach-disclosure system as a potential remedy.
"Furthermore, it is submitted that there should be re-evaluation of the responsible entities' indemnity and limitation on liability where ‘non-viable' funds continue to accepting investors' applications," the submission says.
However, for the latter to be possible, there would need to be further investigation into when precisely a fund becomes insolvent.
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
