Research houses to spruik conflict compliance
Research houses will embark on a campaign of actively promoting their compliance with conflict of interest requirements before the 1 September deadline imposed by Australian Securities and Investments Commission (ASIC) Regulatory Guide 79 (RG79).
RG79 section D requires research houses to actively manage and disclose their conflicts of interest — which may come about due to business models which accept payment for the provision of funds management ratings.
All the major research houses have stated they have in place compliant conflict of interest strategies, according to research conducted by brillient! for Money Management, but that they will be taking action to make those strategies clearer to industry and consumer clients.
Zenith Investment Partners has indicated it will be establishing a separate internal compliance committee solely focused on monitoring the group's RG70 obligations, splitting these away from other supervisory duties held by its compliance officer.
At the same time Zenith will increase the disclosure documentation available on its website, specifically in the areas of conflict management and regarding the process for selecting funds for ratings.
van Eyk Research also believes it is compliant with the RG79 requirements, stating that it avoids conflicts by operating a ‘user pays' model and developing a remuneration structure for research staff which is not linked to the revenue generated by the research side of the business.
In the brillient! research, van Eyk stated it was also looking at lifting its levels of conflicts disclosure after reviewing these in both its research and non-research areas, and standardising them across the business.
Morningstar co-head of fund research Chris Douglas said the company would improve the prominence of its disclaimers relating to how funds are rated and how managers are able to licence the ratings - highlighting the separation and independence of the two arms of the business.
"We are planning on beefing up our disclosure regarding our ratings and their licensing, as well as being more on the front foot about the relationship between Morningstar and (asset consultant) Ibbotson Associates," Douglas said.
Lonsec Research, which operates a ‘direct' model where fund managers are charged to be part of the research process, said it would not be making changes to its conflicts management process as it was confident in the standard of its current process.
Lonsec chief executive Amanda Gillespie said Lonsec would be enhancing aspects of the process at the margin, saying "we have acknowledged the need to keep the ratings process independent and have already achieved that under previous versions of RG79".
Gillespie said evidence that Lonsec's model was acceptable to planners and fund managers was that if there were issues, it would be unlikely the market would access the research.
"It's fairly self-determining. If there's no credibility behind it then the market will not follow us."
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Jason Spits
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