Research houses within Australia's financial services sector have reacted broadly in favour of ASIC's consultation paper and proposals to bolster regulation of the sector.
A number of research house executives said the paper, "Consultation Paper 171 Strengthening the regulation of research report providers (including research houses)", would give the internal actions of researchers an external status.
The paper, released yesterday, proposed, among other things, that research report providers, including research houses, separate their business units as a strategy to manage conflicts of interest as part of moves to improve confidence in the independence and quality of research reports.
Standard & Poor's Fund Services (S&P) head of research Leanne Milton said the paper and the issues it raised were positive.
"On review of the paper, S&P Fund Services already has policies in place that broadly address the core concerns," Milton said.
"At a basic level, the impacts will include a review by research houses of their policies and practices. Taking stock of existing practices is always a positive process. We look forward to being a part of the process."
Zenith Investment Partners director David Wright said the paper held "no great surprises".
"There's probably no great surprises, [however] it does have a practical impact on most research businesses, some more than others," Wright said.
"I feel that a lot of the other measures are really bringing what we do, and probably what the majority of what research houses do, on an internal basis external.
"So things like rating sign-offs and I guess they [ASIC] are just wanting greater accountability in a public sense."
He said he believed such accountability was fair.
"Most of the focus has been on advisers, adviser businesses, the FOS (Financial Ombudsman Service)-type rulings and cases," he said.
"It was only a matter of time before the focus is then going to come on research as well. I do think it's fair. You can't have all that focus on the advisory side of the industry and research not be caught up in that."
Commenting on the paper, a van Eyk spokesperson said: "Van Eyk welcomes ASIC's focus on the issues of independence and quality in investment research."
Similarly to Milton, Morningstar Australasia chief executive Anthony Serhan said the paper addressed many of the industry's key issues.
"As a broad comment, I think a number of the principles that ASIC has laid out in this paper we already operate under and we are supportive of that direction," Serhan said.
"The reality is the research industry is an important part of the industry. In many ways our work helps to make sure capital is allocated to the most productive areas. We do have an important role, so the attention our industry is getting is appropriate and I think we do need to tick the sorts of boxes that ASIC would expect of a fiduciary.
"I don't think we're being singled out. I think all parts of the industry are having it [a focus from ASIC] done."
However, despite gaining the approval of researchers, the paper does raise some potential impacts for the sector.
Wright said potential direct implications for the sector could be felt by some of the asset consultants and one research house that had both a research business and an asset management business.
"The whole industry is being more highly regulated and so with that does come increased compliance, and to be honest both time and expense spent on compliance. So I think that adds an impact for everybody," he said.
"The biannual compliance report and [other] requirements and so forth are things as an industry we haven't had to do before, so those sorts of things are additional."
