APRA puts platform trustees on notice over weak practices
APRA has issued a letter to platform trustees, calling on them to urgently improve their onboarding practices and monitoring to safeguard investments held on platforms.
This follows the information that First Guardian and Shield managed investment schemes were made available by some platform trustees which exposed members to significant loss.
The prudential regulator acknowledged platform trustees may not manage each investment option but they must exercise diligence ensuring the platform’s investment menu as a whole is appropriate, each investment option is true to label, delivers value to members and is underpinned by robust decision making and good governance.
In-scope platform trustees will be provided with individual assessment letters bilaterally and escalate supervisory intensity when required.
“While there can be numerous parties involved in the distribution of products via platforms to members, Platform trustees remain accountable for determining whether an investment option is suitable for inclusion on the investment menu and ensuring that the overall platform menu offering supports good outcomes for members,” it said.
Covering three areas, APRA’s letter calls for improvements in:
- Onboarding: Platform trustees should improve onboarding practices, including in relation to trustee investment governance frameworks and policies, manner of reliance on external research and ratings, and identification and management of potential and actual conflicts of interest.
- Ongoing monitoring: Platform trustees should improve their monitoring of investment options, including in relation to trustee investment governance frameworks and policies, triggers, reporting and oversight.
- Remedial action and member transfers: Platform trustees should improve oversight where outcomes for members are not being delivered, with clearly defined processes to ensure timely and effective remedial action.
All platform trustees will be required to:
- Determine any and all required actions and timing to strengthen frameworks and practices.
- Consider whether they have breached the prudential standards and obligations and inform APRA accordingly.
- Review and confirm FAR accountabilities, including with reference to the core duties and expectations outlined above.
Trustees will be closely monitored to ensure they are enacting the relevant steps and can expect regulatory action if their efforts to comply are inadequate, APRA said.
“APRA will actively and closely monitor steps taken by platform trustees. Where planned enhancements or implementation are assessed inadequate, platform trustees can expect robust regulatory action and the full use of APRA’s regulatory tools.”
AUTHOR
Laura Dew
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