Australian Regulator Consults on Regulatory Approach to Platforms

Australian Securities and Investments Commission (ASIC) announced it is reviewing its regulatory approach to platforms as part of broader efforts to promote investor confidence in the sector. 

The platforms sector attracts significant funds. In the last decade the level of non-superannuation-related investment in platforms has doubled to around $100 billion of funds under management. 

‘The platforms sector has changed and grown considerably and continues to develop and expand,’ ASIC Commissioner Peter Kell said. ‘This is a trend we expect to continue with new forms of vertically integrated business models emerging. We also anticipate that more investors will seek to make direct investments without financial advice.’ 

In response to this shift in investor behaviour, ASIC proposes additional requirements for platform operators to enhance investor rights associated with investments made through platforms. 

‘ASIC is proposing that clients should be entitled to the same rights concerning their investments through those vehicles that they would have had if they had invested directly,’ Mr Kell said. 

Mr Kell said ASIC wanted investors to be confident and informed when making decisions to use platforms and invest through them. 

‘Our proposals aim to strengthen operating requirements for platform operators, ensuring they have adequate resources to conduct their financial services businesses, supported by appropriate corporate structures and compliance arrangements,’ he said. 

ASIC also proposes to require platform operators to disclose how they select financial products for inclusion on investment menus, information that can have an influence on the investment decision of a client. 

Comments on Consultation Paper 176 Review of ASIC policy on platforms: Update to RG 148 (CP 176) are due by 20 April 2012. 

Background

Platforms are managed investment schemes (MISs) for holding and dealing with investments selected by clients. 

ASIC’s current regulatory approach to platforms is set out in Regulatory Guide 148 Investor Directed Portfolio Services (RG 148) and accompanying class order relief for investor directed portfolio services (IDPSs) and IDPS-like schemes. 

ASIC expects that the Government’s Future of Financial Advice reforms, if enacted as proposed, will have significant impacts on the platforms sector. This consultation paper does not address areas of its regulatory approach that are directly related to these reforms, a key example of which is management of conflicts of interest. ASIC will consider how these reforms may affect its final approach to providing guidance for platforms following enactment of legislation and further consultation.