The corporate regulator will conduct surveillance of Australia’s responsible entities (RE) within the managed investment scheme sector to ensure compliance around documentation and approval requirements are met.
ASIC investment managers and superannuation senior manager Jenny Gentles said the industry should expect monitoring activity to begin in 2012 following a new class order for REs on financial requirements.
“I think the industry can anticipate, in the new business plan year [or] in which this [policy] becomes effective or commences, that there will be a surveillance activity to endeavour to get a sense of how people are complying and whether they have a full appreciation and understanding of what we intended,” Gentles told a briefing in Sydney on Tuesday.
The class order, which ASIC announced on 7 November and which takes effect from 1 November 2012, was devised in response to a number of failures that were experienced by REs, she said.
“We’ve increased the buffer required. In a number of instances we’ve certainly increased the liquidity requirement, so that there is cash available, so that there is more liquid assets available when people start getting into difficulty,” she said.
However, she said the policy changes were not made to avoid RE failure.
“We can’t stop failing and we’re not trying to stop failing, nor are we trying to compensate members who are sufferers of those who fail,” she said.
“We’re simply trying to establish stronger [REs] with greater capital behind them to build confidence in the market and hopefully minimise the risk of failure, but not avoid it.”
Key policy elements under the class order include new net tangible asset (NTA) requirements; NTA liquidity requirements; new compliance measures for ensuring REs meet their cash need requirements; and an obligation to obtain an audit opinion on both the NTA and cash need requirement.
Gentles said the NTA requirement was not focused on what an RE did but what it was responsible for.
“When we were trying to determine and/or consult on what might be the appropriate minimum level to conduct RE services, there was quite a wide range of suggestions as to what might be the appropriate minimum. Not surprisingly there were some very large numbers offered by a number of respondents, with up to $1 million or more suggested,” she said.
“What we tried to do was an increase to the minimum that would be meaningful but wouldn’t be a barrier to small participants who, although small, perform a well-resourced RE business that meets all of the requirements of the Corporations Act.
“So we were mindful of the balance for the small end of town and big end of town by setting the minimum requirement of $150,000.”
Despite ASIC setting a 1 November 2012 date, she said it could be possible the class order might experience further change.
“We’re certain that you never get something 100 per cent right the first time. If there are things that you think we haven’t got quite right, we would invite you to come and talk to us,” she said.
“We have endeavoured to be very consultative in respect to these changes. We understand they are big changes and if there is something that we haven’t gotten quite right, come and talk to us.
“If there are some things that need to be perfected … you might anticipate a minor class order update prior to the class order to be effective. So it’s certainly possible.”
