Platforms need to better manage conflicts of interest
The adequacy of disclosure around conflicts of interest within the platform and wrap account sector was still of concern and would undergo further monitoring according to the Australian Securities and Investments Commission (ASIC).
The corporate regulator released a report into a review of the sector and of Regulatory Guide 148 - Platforms that are managed investment schemes and stated the platform sector need to pay ‘particular attention' to managing conflicts of interest.
In the report ASIC stated it had reviewed the conflicts of interest policies of 14 platform operators and still carried concerns "about the quality of the compliance and risk management frameworks established to identify and mitigate the conflicts of interest in vertically integrated structures".
The report said the concerns centred on those platform operators who applied "a high-level global conflicts of interest policy that was not specific to their platforms business" and said operators should have an overarching policy in place which also dealt with specific issues relevant to the functions and products of each platform business.
ASIC said that while it recognised that some operators also had to comply with disclosure requirements set out by Australian Prudential Regulation Authority (APRA) they could operate a single disclosure policy but only if it met the provisions and scope of both regulators.
Another area of concern for ASIC was inconsistency in the reporting of fees and costs in underlying investment vehicles with the regulator to continue monitoring this area. ASIC would also consult with platform operators to fully define ‘indirect costs' for superannuation funds and ‘management costs' for managed investment products with the aim of releasing a class order setting out final working definitions for these terms.
Despite these concerns ASIC Commissioner Greg Tanzer said the regulator was satisfied that platform operators were complying with changes to RG 148 first announced in June 2013 and which had taken effect from 1 July 2014.
"The updated requirements in RG 148 and related class orders appear to be broadly well received and implemented by the platforms sector. We continue to work with industry to address any issues they may experience with the new requirements," Tanzer said.
AUTHOR
Jason Spits
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.
