The Australian Securities and Investments Commission (ASIC) will review its regulatory approach to investment platforms as part of broader efforts to promote investor confidence in the sector.
The regulator is of the view that more investors will seek to make direct investments without financial advice and wants to raise the bar for platform providers.
ASIC is especially interested in how platform operators select financial products for inclusion given that the sector is attracting 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,” said ASIC Commissioner Peter Kell.
“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,” Kell said.
He added that the regulator wants 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.
The watchdog further expects that the Government’s Future of Financial Advice (FoFA) reforms, if enacted as proposed, will have significant impacts on the platforms sector.
ASIC says it will consider how these reforms may affect its final approach to providing guidance for platforms following enactment of legislation and further consultation.
