Responsible entities (RE) operating managed investment schemes in the unlisted property sector comply with their obligations in the main, however, a number of issues still exist, an ASIC review has found.
ASIC Commissioner Greg Tanzer said the majority of the REs reviewed were complying with their obligations and adhered to “good industry practice”.
“We are pleased with the level of cooperation we received and the willingness of REs to commit resources to address issues raised by ASIC,” Tanzer said in a statement yesterday.
“However, there were some areas of non-compliance with key obligations which we have highlighted to ensure REs take immediate steps to rectify.”
The areas needing improvement are non-compliance with key Australian financial services (AFS) licence conditions, including net tangible assets, base-level financial requirements, professional indemnity insurance, external dispute resolution scheme membership and key persons.
Another area of concern was the existence of inappropriate compliance arrangements for the nature, scale and complexity of the RE’s business and insufficient resources to undertake the compliance function.
Poor risk management systems and plans was another problem area, the corporate regulator said.
“Non-compliance was generally associated with inadequate numbers of compliance staff or in circumstances where there has been significant restructuring at either the RE or scheme level,” Tanzer said.
“ASIC has required REs to rectify the breaches identified and to amend and update compliance and risk management arrangements to improve ongoing compliance. We have been following up with REs to ensure the necessary changes are made in a timely manner.”
While the focus of the review was the unlisted property scheme industry, ASIC expected all REs would benefit from “publication of the issues identified and assist them in discharging their duties and obligations as REs and AFS licence holders”, it said.
ASIC had suspended the AFS licence of one RE due to substantial non-compliance with its key obligations, it said.
“ASIC will be conducting ongoing reviews across the managed investment scheme sector,” Tanzer said.
“We will take action where we identify significant or systemic non-compliance in order to improve industry standards and generate broader investor confidence in the sector.”
The regulator’s review covered a cross-section of REs that operated managed investment schemes in the unlisted property sector.
ASIC selected REs on the basis of criteria such as significance in the sector, number/frequency of breach notifications, financial position, failure to lodge statutory reports, industry intelligence and those REs that had little contact with the regulator.
