Alert: Increased ASIC surveillance

December 2018

In the last week, some of our clients have received extensive surveillance notices from ASIC which require a response by 15 January 2019.

These notices are designed to identify compliance failings which could lead to enforcement action.  So, it is imperative licensees respond in a fulsome manner and begin preparation of those responses as early as possible.

What does ASIC want?

ASIC has asked questions running to 40 pages for each client, asking for detailed explanations about—

  • The nature of their business, including its vision and mission, what value proposition it brings to clients, how the business complies with its obligations to act in the best interests of members, and how it manages conflicts.
  • How the business sets investment objectives, measures risk and sets performance targets.
  • How the business model produces profits, and what are its core competencies.
  • How the business protects its investors from financial detriment caused by third party providers.
  • The financial position of each managed investment scheme (registered and unregistered), MDA service or IDPS operated by the business.
  • Whether its human and technological resources are adequate, when they were last reviewed, and what the findings of that review were.
  • Its governance, risk and compliance structures and policies, liquidity management, cyber resilience, compliance, complaints, rewards and incentives structure, and conflicts of interest policies and registers.

In addition, ASIC asks for copies of all policies and procedures, board minutes and agendas, agreements between related parties, all governance documents (such as trust deeds, constitutions, registers, audited reports), all marketing material, and a copy of all financial documents, including cash flow forecasts.

What should you do?

It is clear ASIC has increased its surveillance activity.  If you have not yet received a notice, then it is a good opportunity to review your business to ensure you could answer such requests.

If you have received a notice in recent weeks, we recommend preparing your response as early as possible.  It is also possible to request an extension and we recommend that request be sent as soon as possible.

If you have received similar notices, please contact me or any of our Funds Management team members, so we can assist you with drafting a response and answer any queries.