Regulatory Guide 259 is “aimed at ensuring that the risk management systems of responsible entities including minimum procedures and practices, are adaptable to changing market conditions”, ASIC said, and that these systems remain effective on an ongoing basis.
The guidance includes a number of ASIC expectations for responsible entities, including that they have overarching risk management systems in place and that they have processes for identifying, assessing and managing risks.
“The guidance promotes the early identification and management of risks by responsible entities to help avoid the adverse consequences that may affect investors,” ASIC said.
“There have been a number of collapses of responsible entities which resulted in significant losses to investors and where we consider inadequate risk management systems to have played a role.”
The release of RG 259 follows “extensive consultation” under both Consultation Paper 263: Risk management systems of responsible entities: Further proposals and Consultation Paper 204: Risk management systems of responsible entities, the regulator said.
ASIC did not provide a formal transition period for compliance with the new regulatory guide as responsible entities “are subject to the ongoing obligation to maintain adequate risk management systems”.
“Our intention is to take a constructive and facilitative approach to any breaches of the guidance for a period of 12 months from today, if a responsible entity can show that it is taking steps to bring its risk management system into compliance with the guidance,” ASIC said.
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