Vertically integrated companies overlook conflicts of interest: ASIC

While many vertically integrated businesses are managing conflicts of interest well, there are still players that are not taking their obligations seriously, a review by ASIC has found.

The regulator yesterday released the findings of its review into conflict management practices in vertically integrated businesses within the funds management sector.

The report focuses on 12 AFSL-holding entities that run at least two of such operations as funds management, responsible entity, superannuation trustee, platform structure, investment administration and custody business.

According to the report, many of the organisations had "detailed and tailored policies that appeared to be embedded in business practices from boards and senior management, cascading down to business units".

"Entities were able to demonstrate a commitment to reviewing and updating the policy, communication and training," ASIC said.

However, in other companies, the conflict policy appeared to be part of many that were put in place to simply satisfy the regulatory requirement, and not taken seriously.

"It is clear that some organisations adopt a generic template conflicts policy, with no demonstrated commitment to the conflicts management in the organisation," said ASIC commissioner Greg Tanzer.

"We saw some very real examples where the conflict in question was so fundamental that complete avoidance was necessary – the conflict could simply not be managed internally and disclosed externally."

The report did not name the organisations that were reviewed and did not include deposit-taking, insurance or financial advice business divisions.

ASIC chairman Greg Medcraft said it is important for company leaders to demonstrate good conflicts of interest practices.

"As our work on culture has indicated, the 'tone', being the attitude and commitment to conflicts management, must come from the 'top' and needs to be appropriately cascaded down the organisation through business practices, communication and accountability, as well as appropriate governance and remuneration," he said.

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0 #6 Philip 2016-03-26 13:25
I jut love that some in this industry prefer to blame the regulator for bad behaviour and their own shortcomings, rather than discuss the perpetrators. I agree with Steve that Medcraft has done well despite having one arm tied behind his back and we should be supporting moves to improve ASIC's funding. Regulation is not the problem. "Red tape" is what we get when consumers are being constantly dudded by those who seek to make a fast buck and attempts to cut red tape everywhere are simply business seeking to use this period of conservative government to get its way. We professionals should openly support consumer rights and help get rid of the dead wood that we all know litters the marketplace. Let's face it - we wouldn't accept much of what happens to consumers of our industry's services if they happened to us in any other market.
+2 #5 Gerry 2016-03-24 12:32
The conflicts have become more prevalent after FoFA. Platforms with lower admin costs for using own brand funds...I mean seriously...hav e we learned nothing? sure, costs are falling which is great, but only because the conflicts are rising. You can't have your cake and eat it too Mr. Medcraft, and there's some scientific term I could spew out also.
+2 #4 Joe 2016-03-24 12:30
Um and what aboutthe greatest vertically integrated organisation within the financial services space? The ISA.

Rather than stringent conditions imposed, instead they get a crave out and exemptions from the legislation that enforces every other sector to act in clients best interests, run comparisons and give appropriate advice...

Until ASIC get real and start on this sector as well, (which will never happen under Labor appointed lackeys Medcraft and Kell) they are nothing but the laughing stock and red neck cousin of the regulator world.
0 #3 Compliance Steve 2016-03-22 14:46
It's rare but I'm going to stick up for Greg Medcraft and ASIC. I think they have made significant headway despite governments continuously cost cutting to the point ASIC is severely under resourced to do the job it needs to. You are correct that new laws wont stop anything if ASIC do not have the people resources to police the laws. Start complaining to your local MP, as in my opinion Greg Medcraft has done well with a limited budget. Happily aided by Adele Ferguson and ABC Four Corners. As to Banks owning life and investment businesses well that was a car crash waiting to happen. I've done my bit to get some rogues out of the industry. What about you?
+4 #2 Steve 2016-03-22 13:45
This just proves ASIC has been asleep at the wheel for years.

How does Greg Medcraft keep his job.

It astounds me that the industry got so out of whack under his time as chairman.

The government should be looking much closer at it's own regulator instead of acting like every problem is something new. The problems have been around for years.

FOFA, the new LIF rules and more education won't change a thing if the regulator just sits outside the door like a puppy waiting for its bone
+5 #1 Old Risky 2016-03-22 10:18
Memo Mr Medcraft. Banks should not own insurance companies. The culture clash is enormous. Banks are there for the short term - do the deal, collect the bonus, move on. If the customer moves on, who cares

Life insurance is a LONG TERM business. Customers can stay for 20-30 years, providing their premiums are not increased by gouging for shareholder value.

Banks use their insurers as transit lounge for Execs on the climb. These people are always bankers first This problem will not go away

Convince Governments to tell banks to sell their insurers.

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