ASIC unveils new investment research guidance Samantha Hodge
Tue 11 Dec 2012
ASIC has released updated policy guidance to improve the quality and reliability of research reports.
The updated Regulatory Guide 79 ‘Research report providers: Improving the quality of investment research’ (RG 79) aims to help research providers better comply with their legal obligations under the Future of Financial Advice (FOFA) reforms.
ASIC will conduct targeted surveillance of research report providers to assess compliance with the updated guidance, measuring both broad compliance as well as discrete issues such as conflict of interest management.
The guidance applies to research analysts, securities analysts or research houses and other research providers for investment products.
It aims to tackle issues surrounding managing conflict of interest; quality, transparency and robustness of the research process; and the ability of users to form a view about the research’s quality and reliability.
“In recent times, there have been serious concerns about the quality of research issued by research providers, particularly in light of various investments failures that had been rated highly,” ASIC commissioner Peter Kell said.
“Research report providers are important gatekeepers in the financial services industry, standing between product issuers and the investors who purchase investment products either directly, through advisers or through their super fund.
“It is particularly important for research providers to manage conflicts of interest that may affect the ultimate research rating.
“We have undertaken extensive consultation with the industry and broader investment community to produce guidance that will facilitate credible and reliable research but also makes clearer its limitations to the user,” Mr Kell said.
RG 79 also sets out ASIC’s expectations that research providers effectively manage conflicts of interest so as to limit their impact on the integrity of investment research.
In some cases, conflicts can be managed with robust processes and controls while in others, the conflict is so significant that it cannot be managed. In such circumstances, ASIC expects the conflict to be avoided entirely.
“If standards do not improve, ASIC will revisit the regulation of research report providers and consider whether specific law reform is needed,” Mr Kell said.