Researchers targeted in conflict of interest crackdown
The relationship between product providers and research houses has appeared on the Australian Securities and Investments Commission’s (ASIC) radar with new anti-conflict of interest guidelines becoming effective in 2005.
All Australian Financial Services Licence holders will be subject to specific obligations to manage conflicts of interest as of January 1, 2005, and reflects the regulator’s on-going concern as to the role played by research providers.
According to ASIC deputy executive director of financial services regulation Pamela McAlister research report providers play a fundamental role in getting timely and accurate information to the market.
“Research report providers will have, for the first time, specific guidance on the issues they should take into account when designing, implementing and maintaining conflicts management arrangements,” McAlister said.
McAlister said local and overseas experience has confirmed the importance of such groups managing conflicts of interest and promoting integrity in research.
“In our view, licensees whose conflicts management arrangements are not consistent with the guide are less likely to be complying with their obligations and will be exposed to a greater risk of regulatory action.”
Under the new guidelines, research report providers will need to consider implementing information barriers, that is, physically separating research staff from those performing investment banking, corporate advisory or dealing functions.
Other areas highlighted by the regulator include avoiding the issue of research on a product issuer at the same time as providing non-research services to the issuer, as well as ensuring research report providers do not unfairly trade ahead of the distribution of a research report.
The ASIC directive also alerts research providers to issues involving benefit and remuneration arrangements under which the remuneration of research staff is contingent on the introduction or retention of clients for non-research areas.
Recommended for you
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
As advisers risk losing two-thirds of FUA during the $3.5 trillion wealth transfer, two co-founders underscore why fostering trust with the next generation is vital to retaining intergenerational wealth.
As advisers seek greater insights into FSCP determinations, what are the various options considered by the panel and can a decision be appealed?
