ASIC warns research houses on ‘independence’
Research houses will need to be much clearer about their commercial models and how they impact their independence as a result of a decision by the Australian Securities and Investments Commission (ASIC).
In a move which would have implications for research houses working across financial services, the regulator has required a boutique research provider, Far East Capital Limited (FEC) to include specific, prominent and meaningful conflicts of interest disclosure in its research report.
ASIC found that the Sydney-based boutique research provider specialising in the resources sector, published research reports on its website about specific companies but did not sufficiently disclose that it had received capital raising and corporate fees from some of the companies.
As a result, it required FEC to remove the words ‘independent’ and ‘objective’ from its website.
It said FEC’s disclosure of associations, shares and roles held within the companies was not sufficiently specific, prominent or meaningful.
ASIC reinforced that management of conflicts of interest was currently a strong focus of its work and that it had recently clarified acceptable uses of the word ‘independent’ and that it was reminding financial services providers that they had a responsibility to accurately describe the services they offer.
ASIC noted that in December it had released Regulatory Guide 263 on Sell-side Research which provided specific guidelines on how licensees should appropriately manage conflicts of interest during capital raisings and also provided general guidance for licensees on the identification and handling of inside information by research teams, and about the structure and funding of sell-side research teams.
Recommended for you
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
