Mid-sized licensees sitting in compliance blind spot
Those mid-sized licensees with 16–50 authorised representatives are experiencing a blind spot, according to compliance firm Assured Support.
Referencing data in the annual Holley Nethercote compliance report released this month, the firm described how licensees of that size are too large for direct oversight yet too small to implement compliance programs at a large level.
Key weaknesses observed included a lack of documented monitoring and supervision policies, experienced at over 40 per cent of firms, and less usage of checklists or file audits supplemented with interviews or system audits.
“Despite being licensed under the same regime as larger firms, mid-sized licensees often lack the necessary sophistication or infrastructure to detect or respond to emerging compliance risks. They also exhibit weaker engagement with compliance consultants and less frequent reviews.”
An implication of this, it said, is that ASIC is expect to develop tailored supervision for this cohort which could include focused regulatory projects, thematic surveillance, and compliance capability assessments.
“Licensees in this category should pre-empt regulatory attention by strengthening governance structures, resourcing, and documentation practices.”
A second trend observed by the firm was that over half of respondents of all sizes (54 per cent) across both retail and wholesale claim to have no conflict of interest. This was up from 41 per cent last year.
While over 90 per cent said they did have a conflicts policy or register, they admitted they were often dormant or outdated which Assured Support said suggests an educational gap in understanding what constitutes a conflict of interest.
“ASIC will likely prioritise conflict management in future surveillance and enforcement activity. Guidance may be updated to include detailed expectations on conflict identification, logging, resolution, and disclosure. Inadequate or absent conflict registers may be seen as evidence of systemic governance failure.”
This was also noted by Holley Nethercote, which originally produced the compliance report, with associate Josh Wigney stating it is expected that firms will have conflicts. These can occur in areas such as staff remuneration, internal structures, licensee interest, or referral arrangements.
He recommended: “Ensure that conflicts arrangements are implemented and maintained. For example, ensure the arrangements are approved by senior management, regularly monitored and reviewed and overseen by a person with responsibility for their implementation, reviewing, and updating.
“For advice businesses – ensure you have robust monitoring and supervision policies in place to ensure that any personal advice provided is in the client’s best interests, appropriate, and prioritises the interests of the client.”
AUTHOR
Laura Dew
Recommended for you
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
There is a gap in the market for Australian advisers to help individuals with succession planning as the country has been noted by Capital Group for being overly “hands off” around inheritances.
ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager.
Having peaked at more than 40 per cent growth since the first M&A bid, Insignia Financial shares have returned to earth six months later as the company awaits a final decision from CC Capital.
