Managed fund REs rapped by ASIC over compliance failures

ASIC has uncovered widespread failings in the compliance frameworks of responsible entities (REs) overseeing nearly $1 trillion in managed funds, warning that serious governance gaps could leave retail investors exposed.

In a review published on 2 June, ASIC assessed 50 compliance plans covering 1,471 funds – representing 45 per cent of all registered funds and 47 per cent of the approximately $2 trillion value of all registered managed fund sector assets.

The findings paint a concerning picture, suggesting that most plans did not adequately address key regulatory requirements under the design and distribution obligations (DDO), internal dispute resolution (IDR), and reportable situations (RS) regimes.

“These plans set out how responsible entities comply with the law, yet many plans we reviewed failed to adequately set out compliance with important regulatory obligations,” said ASIC commissioner Alan Kirkland. “Failing to plan is planning to fail.”

Of particular concern, Kirkland noted, was that some plans completely omitted DDO requirements – despite these rules being in place since 2021 – indicating that many compliance plans have not been meaningfully reviewed in years.

“There is no excuse for the scale of poor practice we have identified. In ASIC’s view, these types of deficiencies raise concerns that governance arrangements are lacking,” Kirkland said.

ASIC also flagged instances where some responsible entities had improperly relied on sections of a master compliance plan from a fund managed by another RE, leaving their own funds without a substantive or tailored compliance framework.

Compliance plans are a cornerstone of the regulatory regime under the Corporations Act 2001, intended to provide a clear roadmap for REs to ensure their funds meet legal obligations and protect investors. An inadequate or outdated plan means investors may be left without the safeguards the law is meant to provide.

ASIC said it had written to several REs over compliance failings, launched investigations into others, and urged the entire sector to urgently overhaul plans and adopt stronger governance practices.

“We will continue to monitor the quality of compliance plans going forward,” Kirkland said. “This review will not be limited to the obligations we examined in our recent surveillance.”