Australia’s managed investment regime requires significant change, with a number of industry executives pointing to the treatment of legacy products, product rationalisation and a greater focus on licensing as key areas of concern.
Financial Services Council (FSC) chairman Peter Maher said after a decade of Australia’s financial services industry operating under the same regime, it was time for change.
Maher, a Macquarie Group executive, made the comments as part of a session at the 2012 ASIC Summer School earlier this week that questioned whether the global financial crisis (GFC) or the collapse of Trio Capital represent catalysts for change.
The session also questioned what the future would hold for the regulation of collective investments in Australia.
“The view of the FSC is that [regime section] 5c operates as an effective regulatory regime. So for instance it provides a framework to manage withdrawal offers to avoid a fire sale of assets, which at the end of the day is there to protect the long-term interest of investors,” Maher said.
“Now, it is 10 years old and so therefore improvements can be made . on specific issues, but is wholesale change completely necessary? And is it about focusing on those issues which will go to the heart of the protection . [and the FSC’s] core objective of how do we maintain and increase investor confidence?”
The FSC believed product rationalisation and tidying up legacy products effectively were more pressing areas than some of the Corporations and Markets Advisory Committee recommendations, he said.
As well as making broad comments, Maher also turned his attention directly to the collapse of hedge fund manager Trio Capital, labelling its demise as “embarrassing”.
“It is embarrassing for our industry that we do have this occurring, so I’m in no way intending to apologise or be defensive about the Trio circumstances,” he said.
“It certainly was an unfortunate reputational event for the industry and I think again, going back to that confidence, and like reputation is something that arrives on a snail and leaves on a train. And so it definitely has an impact, which I think everybody in the industry needs to consider. It did undermine investor confidence.”
Trust Company chief executive John Atkin said his key concerns regarding the regime were around licensing and registration.
“We support more stringent licensing and registration powers being given to ASIC,” Atkin said.
“I would go almost so far as flipping it so that you had to have an independent RE (responsible entity) unless you could satisfy ASIC you had all of these arrangements in place internally, which I’m sure all the major players would be able to satisfy quite quickly.”
Another concern for Atkin is the issue with the temporary RE provisions for managed investment schemes.
He said the issue would be fixed if there were “some sort of moratorium for an incoming RE akin to the arrangements you have under the deeds of company administration”.
