ASIC has revealed surveillance of personal investment switching by directors and senior executives of superannuation trustees has identified conflicts of interest by trustees’ management.
On Wednesday, the corporate regulator confirmed it looked at a sample of 23 trustees and their conduct during “increased market volatility” on the back of the COVID-19 pandemic due to concerns that fund executives were using price-sensitive valuation information for personal gain.
The conflicts of interest identified by ASIC included a failure to identify investment switching as a risk, disparity in board-level engagement and a lack of restrictive measures to limit executives’ ability to switch investment options.
“We expected superannuation trustees to have robust conflict of interest policies that dealt adequately with investment switching, including by their directors and executives. What we found instead was often a clear failure to identify investment switching as a source of potential conflict, resulting in a lack of restrictive measures and oversight to adequately counter this risk,” ASIC commissioner Danielle Press said.
“This is very concerning given the level of sophistication and governance required of trustees when managing millions of dollars in assets on behalf of fund members.”
ASIC said it will consider regulatory action if misconduct causing consumer harm is identified.
Ms Press added that trustees must have “effective” conflicts management frameworks in place to prevent the misuse of information by directors and executives.
“Policies should cover the identification, control, management and regular monitoring of conflicts as well as the consequences for non-compliance,” she said.
“Such protections will help trustees manage the risk that their executives' own interests or those of a related party results in loss of confidence in the fund or in detriment to members.”
ASIC noted that some trustees that do not have frameworks in place will look to implement processes moving forward.
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