Lonsec says it is 'well placed' for the Australian Securities and Investments Commission's (ASIC's) revised Regulatory Guide 79, 'Research report providers: Improving the quality of investment research' (RG 79) released last week.
Lonsec chief executive Amanda Gillespie told InvestorDaily that the company had a good indication from ASIC about the key areas they were going to focus on prior to the update.
"We've been pretty confident that our current model is well placed, but there will be some enhancements and tailoring in a few areas," she said.
She explained that Lonsec is confident it already has the structures in place to support the strong focus of RG 79 on the separation of auxiliary business units.
"That said, our research consulting clients benefit from a consistent view across both our research and consulting teams. We need to be careful that any required structural changes make sense and do not compromise the overall quality of the research output delivered to clients," Ms Gillespie said.
"I think the devil will be in the detail of how some of the guidelines are actually implemented," she said.
The RG 79 guidance has been relatively broad, but suggested research report providers will be able to determine the best way to apply some of the regulation, and what approach is most suitable for each business.
"We're already doing a lot of that so it'll really be more a matter of enhancing some of our current practices to make sure they are specifically meeting ASIC's requirements," Ms Gillespie said.
Last week Lonsec welcomed ASIC's move to beef up the quality of investment research through updating the regulator's guide for providers.
The research house also welcomed ASIC's acknowledgement that it will not require research houses to avoid conflicts of interest associated with direct payments from product issuers to research houses at this time.
"It is pleasing ASIC has acknowledged that indirect conflicts can be as potentially corrosive as direct conflicts to the integrity of the research and that it will not require the latter to be banned," Ms Gillespie said.
She noted that the updated guidance highlights the fact that conflicts arising from cross-subsidisation activities and indirect payments from product issuers to research houses share the potential to negatively affect the independence and integrity of the overall research process.
Lonsec added it is also pleased with ASIC's decision that indirect payments be subject to the same disclosure requirements as direct payments from product issuers.
Earlier last week ASIC unveiled the new investment research guidance aimed to help research providers better comply with their legal obligations under the Future of Financial Advice (FOFA) reforms.
ASIC said it will conduct targeted surveillance of research report providers to assess compliance with the updated guidance, measuring both broad compliance as well as discrete issues such as conflict of interest management.
The guidance applies to research analysts, securities analysts or research houses and other research providers for investment products.
It aims to tackle issues surrounding managing conflict of interest; quality, transparency and robustness of the research process; and the ability of users to form a view about the research's quality and reliability.
