Archived News for Finance Sector Professionals

ASIC has released the findings of a review of responsible entities (REs) operating managed investment schemes in the unlisted property sector.

As part of this review, ASIC is highlighting some areas where compliance behaviours could be improved to meet both the legal obligations of the REs and good practice within the industry.

ASIC Commissioner, Greg Tanzer, said ASIC chose REs operating unlisted property schemes because they are a popular investment vehicle for retail investors and they pose some risks, particularly because of their illiquidity. Current economic conditions meant this sector had been experiencing some stress.

‘We found that the majority of the REs reviewed are complying with their obligations and adhering to good industry practice. We are pleased with the level of cooperation we received and the willingness of REs to commit resources to address issues raised by ASIC.

‘However, there were some areas of non-compliance with key obligations which we have highlighted to ensure RE’s take immediate steps to rectify’, Mr Tanzer said.

These areas include:

non-compliance with key Australian financial services (AFS) licence conditions including net tangible assets (NTA), base level financial requirements, professional indemnity insurance, external dispute resolution scheme membership and key persons
inappropriate compliance arrangements for the nature, scale and complexity of the REs business and insufficient resources to undertake the compliance function
poor risk management systems/plans
insufficient measures to control and monitor the release of information to investors, and
inadequate controls to manage related party transactions.

More detail about the specific issues identified and ASIC guidance about compliance with these obligations is provided here.

‘Non-compliance was generally associated with inadequate numbers of compliance staff or in circumstances where there has been significant restructuring at either the RE or scheme level’, Mr Tanzer said.

‘ASIC has required REs to rectify the breaches identified and to amend and update compliance and risk management arrangements to improve ongoing compliance. We have been following up with REs to ensure the necessary changes are made in a timely manner’, Mr Tanzer said.

ASIC has suspended the AFS licence of one RE due to substantial non-compliance with its key obligations.

‘Although the focus of this review was the unlisted property scheme industry, we expect all REs will benefit from publication of the issues identified and assist them in discharging their duties and obligations as REs and AFS licence holders. In particular, ASIC encourages all REs to ensure that they are adequately resourced to regularly review and implement their compliance arrangements’, Mr Tanzer said

‘ASIC will be conducting ongoing reviews across the managed investment scheme sector. We will take action where we identify significant or systemic non-compliance in order to improve industry standards and generate broader investor confidence in the sector’, he added.

ASIC’s review covered a cross section of REs which operate managed investment schemes in the unlisted property sector. ASIC selected REs on the basis of criteria such as significance in the sector, number/frequency of breach notifications, financial position, failure to lodge statutory reports, industry intelligence and those REs who have little contact with ASIC.

The reviews sought to examine whether the RE was in compliance with the conditions of its AFS licence and whether compliance, risk management and continuous disclosure arrangements were adequate to ensure the RE meets, and continues to meet, its obligations under the Corporations Act 2001 and AFS licence.

Timeshare industry exempted from FOFA requirements

The Minister for Financial Services, Bill Shorten, has announced an exemption for employees of the timeshare industry from the ban on conflicted remuneration under the Future of Financial Advice (FOFA) reforms that will allow the industry to continue to remunerate its employees through sales-based commissions.

Women's retirement most at risk as poor investor sentiment continues

Females and those aged 35-60 are at risk of not meeting their retirement objectives while weak investor sentiment continues, according to The University of Western Australia and Colonial First State Global Asset Management (CFSGAM) research.

The findings are based on the CFS-UWA Business School Equity Preference Index (EPI) which measures a sizeable database of managed fund data to gauge investor sentiment in Australia.

The overall results show a decline in concern over the vulnerability of equities has developed since September 2011. However when those figures are broken down, women continue to appear more sensitive to current changes in market performance than males.

Females were more likely to move out of equities than males after the Global Financial Crisis, which began in 2007. While this trend follows a historical pattern the researchers consider it could also follow that since the GFC, female employment has been slower to return than male employment.

The research cites that since a labour market trough in June 2009, unemployment among men has fallen 17 per cent compared with unemployment among females which has risen three per cent.

"The cautious investment behaviour of women raises concerns about lower female superannuation balances, with growing risk of not meeting their retirement objectives unless savings level increased," report author Winthrop Professor Ray da Silva Rosa said.

More generally, traditional investor groups aged over 35 have also shown a tendency to move out of equities and into capital preservation compared with younger investors.

"It's unclear if this lower preference for equities will continue but in Australia the relatively attractive deposit rates are creating little incentive to return. If confidence in equity markets fails to return, it's likely to have a severe impact on superannuation benefits, particularly for those most risk averse groups, which include females and middle age groups (35-49 and 50-59)," Professor da Silva Rosa said.

The report concludes that if investor confidence in equities does not return, there will be a need for an increase in savings levels to compensate for lower expected returns to meet the retirement needs of Australia's ageing population.

Harries to take marketing GM reins at Westpac

Westpac has announced the appointment of John Harries as the company's new General Manager, Strategic Marketing in its Australian Financial Services (AFS) division.

APCA tracks fraud boom

The Australian Payments Clearing Association (APCA) has released payments fraud statistics across all financial institutions, finding that the total value of check and payment card fraud in Australia for 2011 year had increased 11.4 cents to 16.2 cents in every $1,0000 transacted.

Fewer bills being paid on time finds D&B

The number of Australian companies paying their bills on time has fallen markedly during the June quarter as they struggle to deal with reduced cash flow, according to the latest Dun & Bradstreet Trade Payments Analysis.

Commbank rolls out POS suite

The Commonwealth Bank has unveiled its new point-of-sale (POS) system, including the release of its new Albert touch screen omni-commerce device which will run the bank’s new CommBank Pi software platform system.

Commonwealth bank's executives to suffer for the greater good

The Commonwealth Bank is set to follow in the footsteps of its competition after it announced it will freeze the pay of around 400 senior staff, including CEO Ian Narev, in a bid to ward off potential job cuts.

IMF downgrades forecast

The International Monetary Fund (IMF) has downgraded its global economy growth forecasts by .1 per cent, citing ongoing economic turmoil in Europe and the uncertainty in global financial markets. The revised growth figures see the IMF’s forecasts down to 3.5 per cent for the year, the lowest rate since the depths of the global financeal crisis in 2009.

Home lending slips in May

Results published by the Australian Bureau of Statistics (ABS) show that new home lending has slipped back in May. The ABS tracked a 1.4 per cent contraction in the value of total dwelling commencements over the April to May period, while fixed loans entered freefall, recording a 4.6 per cent fall.

Australian businesses loyal to big four

Australia’s largest businesses are increasingly less inclined to move their primary transaction banking relationship to a non-big four bank, according to recent research conducted by banking industry consultants East & Partners.

Fixed interest inquiries flat-line

Retail mortgage specialist Loan Market has found that inquiries for fixed interest rate mortgages have flat-lined since the Reserve Bank of Australia (RBA) lowered the official cash rate to 3.5 per cent.

Government enters high-level trade dialogue with Hong Kong

The Federal Government has announced a new high-level dialogue between senior business leaders from Australia and Hong Kong on RMB trade and investment.

HILDA gives insights into Australia's GFC performance

Melbourne University’s Household Income and Labour Dynamics in Australia (HILDA) Survey has produced a detailed report, showing how Australia coped during the global financial crisis.

Perpetual to sell mortgage business to FMS

Financial services group Perpetual Limited has announced it has undertaken its first major step in its Transformation 2015 program by reaching an agreement to sell its mortgage processing business (trading as Perpetual Lenders Mortgages Services or ‘PLMS’) to FAF International Property Services, an affiliate of First Mortgage Services (FMS).

Queensland outlines response to audit

The Queensland Government has outlined its interim response to the recently released Commission of Audit into the state’s finances, with Treasurer Tim Nicholls pledging the Government will return the state’s finances ‘to a position of strength’.

Unemployment inches to 5.2 per cent

Australia's seasonally adjusted unemployment rate increased 0.1 percentage points to 5.2 per cent in June, as announced by the Australian Bureau of Statistics (ABS).

The ABS reported the number of people employed decreased by 27,000 to 11,500,500 in June. The decrease in employment was mainly driven by decreased full-time employment, down 33,500 people to 8,065,500, and was offset by an increase in part-time employment, up 6,600 people to 3,435,000. The decrease in employment was driven by a decrease in both male and female full-time employment.

The number of people unemployed increased by 7,200 people to 631,300 in June, the ABS reported.

Monthly aggregate hours worked showed a decrease in June, down 19.6 million hours to 1,602.1 million hours.

The ABS reported a decrease in the labour force participation rate of 0.2 percentage points in June to 65.2 per cent.

This month's article 'What's new in Labour Force' provides details regarding the impact of preliminary population estimates from the 2011 Census of Population and Housing and also the upcoming improvements to the labour force survey as a result of a holistic review of the entire ABS Labour Household Survey program.

More labour force results are in the June 2012 issue of Labour Force, Australia (cat. no. 6202.0), as well as the upcoming June 2012 issue of Labour Force, Australia, Detailed (cat. no. 6291.0.55.001) due for release next week on July 19. Both publications are available for free download (after release) from the ABS website - www.abs.gov.au.