Extra ASFL condition for IOOF Investment Services

The corporate watchdog has imposed an additional condition on the Australian Financial Services (ASF) Licence of IOOF Investment Services (IISL) to improve governance and conflicts management.

The Australian Securities and Investments Commission (ASIC) said IISL sought a variation to its licence to facilitate the current responsible entity (RE) and service operation functions of IOOF Investment Management (IIML), a dual regulated entity, to be transitioned to IISL, leaving IIML as a standalong registrable superannuation entity (RSE).

ASIC said it imposed the additional licence conditions after considering concerns highlighted by the Royal Commission about “the real and continuing possibility of conflicts of interests in IOOF Group’s business structure, ASIC’s past supervisory experience of these entities and material supplied by IISL as part of its licence variation application”.

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Commenting, IOOF chief executive, Renato  Mota said: "This stronger governance framework for IISL is in line with our amibtion of establishing higher standards of governance for ourselves and the industry.

"As we accelerate our focus on governance, together with the proposed acquisition of ANZ's P and I business, we are confident we are building better outcomes for all our stakeholders and the communities we serve."

IOOF said it had been working towards the separation of the IIML RE and RSE functions by 31 December, 2019. 

The additional conditions covered:

  • Governance – by requiring that IISL has a majority of independent directors with a breadth of skills and background relevant to the operation of managed investment schemes and IDPS platforms;
  • The establishment of an Office of the Responsible Entity (ORE) – that is adequately resourced and reports directly to the IISL board, with responsibility for:
    • oversight of IISL’s compliance with its AFS licence obligations;
    • ensuring IISL’s managed investment schemes are operated in the best interests of their members; and
    • overseeing the quality and pricing of services provided to IISL by all service providers (including related companies)
  • The appointment of an independent expert, approved by ASIC, to report on their assessment of the implementation of the additional licence conditions.

ASIC commissioner Danielle Press said ASIC was serious about improving the quality of governance and conflicts management across the funds management sector and ensuring that investors’ best interests are the highest priority of fund managers.

“ASIC will use its licensing power, including through the imposition of tailored licence conditions to address governance weaknesses, the risk of poor conduct or vulnerabilities to conflicts of interest in a licensee’s business model,” she said.

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