ASIC to commence MIS auditing in FY27

ASIC will begin reviewing the financial reports of managed investment schemes as part of the regulator’s FY27 priorities.

The corporate watchdog announced on Monday morning it will review 25 audit files in FY27 which will expand coverage to MISs in addition to its usual focus on listed and unlisted companies and registrable superannuation entities.

ASIC will select audit files from a mix of sources including where there has been a material correction to a financial report or where the regulator is concerned that a financial report may be materially misstated; files based on other internal or external data (including independence threats) which indicates a risk to audit quality; or from a random selection process.

The move comes in the aftermath of the $1 billion Shield and First Guardian collapse, after ASIC acted against the two MISs due to concerns that investor money was being misused on high-risk investments, pet projects of directors and personal expenses. Court proceedings against both funds are ongoing.

Investments in Shield and First Guardian grew due to a sophisticated network of lead generators that contacted people who used online “superannuation health check” advertisements before utilising high-pressure sales tactics to refer them to financial advisers.

Budget papers revealed earlier this week that there was a provision for $17.8 million over four years from FY27, and $1.4 million a year ongoing after that to strengthen MIS governance requirements, supervision and enforcement.

Minister for Financial Services Daniel Mulino indicated last week that ASIC will likely be instructed to use that budgetary allocation to monitor MIS flows via platform data collection.

ASIC had told a Parliamentary committee earlier this year that it can’t functionally monitor all MISs, and outgoing chair Joe Longo also criticised the current legislative standards for MIS approval process as being a check-a-box process.

Greater scrutiny of superannuation switching and more regulatory oversight of MISs are on the cards as the government released another consultation in response to the Shield and First Guardian collapse.

It’s just one of several consultations currently being undertaken by the government, which could see other changes including a ban on advice fee deductions for super switching, requiring trustees to compensate members for losses, ending ‘but for’ determinations from the CSLR, and higher restrictions on lead generation are among the suite of reforms proposed by the government.

But outside of policy changes, the Financial Services Council recently established industry-led solutions by requiring the platform trustees in its membership to lift oversight standards for MISs.