ASIC will push for underlying portfolio disclosure of managed investment schemes (MIS), chair Greg Medcraft said.
“An area that really crystallised on Trio [Capital] was, in fact, underlying portfolio disclosure,” Medcraft told last week’s ASIC 2012 Summer School in Sydney.
He said if showing Trio’s underlying portfolio had led just one investor to sound a warning, thousands could have been spared.
“I’m very, very passionate about disclosing the underlying portfolio,” he said.
Trio funds, including Astarra Strategic Fund and ARP Growth Fund, collapsed in December 2009. Shortly before its collapse, its funds under management reached $1 billion, mainly from self-managed superannuation fund (SMSF) investors and other retirement savers.
Medcraft said Australia’s corporate regulatory system relied on investors to take a lot of responsibility for their investments without the necessary tools to do so.
“I think you’ve got to give them the tools to actually exercise that responsibility,” he said.
Medcraft said another area of concern was the compliance committee’s function as a key participant in the system of MIS checks and balances.
“I think we’ve seen it just doesn’t work so we’ve actually said in our submission to the [Parliamentary Joint Committee] inquiry that a key internal control in the MIS basically appears to be failing,” he said.
“We’ve seen that across a number of the failures in MIS so that is an issue.”
In its submission in September to the PJC, the corporate regulator said compliance plans for MIS had been too generic and recommended detailed plans for MIS.
ASIC also recommended that compliance committee members be subject to a set of requirements and complete an approval process.
“I think Astarra demonstrated, in terms of the value chain, some areas where there needed to be strengthening in the MIS regime,” Medcraft said.
He said custodians needed to conduct higher levels of due diligence on their clients and custodians, themselves, needed to be subject to greater regulatory scrutiny.
“I think with the word ‘custodian’, investors see a high level of comfort . . . We’ve said perhaps we need to look at what’s happening offshore, perhaps the European approach to custodian regulation,” he added.
