The Australian Securities and Investments Commission (ASIC) has released a consultation paper and proposed regulatory guidelines on risk management practices for responsible entities (REs) of managed funds.
Consultation Paper 204 Risk management systems of responsible entities will seek to standardise risk management for REs that are not regulated by the Australian Prudential Regulation Authority (APRA).
"This sector has gone through a transformation in recent times, including consolidation, and the ability to identify and act upon risks before they emerge as an issue is key for businesses and for promoting confident and informed investors," ASIC commissioner Greg Tanzer said.
"One of the lessons for financial regulators since the global financial crisis is the need to become more proactive and to respond to market trends."
The paper will seek to standardise much of the current practice in the sector, including ensuring risk management systems comprise processes to identify, assess and treat risks and ensuring these processes are suitable for individual business objectives.
The consultation paper also proposes a regular review of risk management systems to ensure they are relevant to individual businesses.
"Our review and broader regulatory experience suggest that most of the practices covered by the proposed requirements are already included in the existing risk management systems of most responsible entities, with varying degrees of sophistication," the report said.
"Given the fundamental nature of each of these practices in helping responsible entities to manage risk, we consider that it is important to require them all for all responsible entities that are not APRA-regulated."
Submissions in response to CP 204 are due by 3 May 2013.
