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03-041 ASIC finds some tax-driven mass-marketed schemes have poor compliance
The Australian Securities and Investments Commission (ASIC) today released a report into the quality of advice and disclosure provided for primary production managed investment schemes, Compliance with advice and disclosure obligations: ASIC report on primary production schemes.
ASIC’s report examines the correlation between the receipt of high commissions by financial advisers and the provision of inappropriate or misleading advice to encourage investors to invest in such schemes.
‘Our surveillance found that there were low levels of compliance amongst promoters of tax-driven mass-marketed schemes’, said Mr Ian Johnston, ASIC’s Executive Director, Financial Services Regulation.
‘ASIC found that there was often poor disclosure of commissions and there were a number of instances of people being put into these schemes as a result of poor advice’, Mr Johnston said.
ASIC also found that:
- there was a low level of compliance with the record keeping that is required by law
- there were difficulties in assessing whether sufficient capital was being maintained and contributed to the activities of the scheme
- responsible entities frequently outsourced important functions and engaged inexperienced managers.
‘ASIC is investigating a number of suspected breaches of the law and will take enforcement action as appropriate. ASIC has also identified areas for potential policy or law reform and will discuss these with industry and the Commonwealth Treasury’, Mr Johnston said.
‘ASIC continues to warn investors that they need to take appropriate independent advice about tax-driven schemes’, he said.
The report can be found on the ASIC website www.asic.gov.auat the Financial Services Reform page.
ASIC’s report, Compliance with advice and disclosure obligations: ASIC report on primary production schemes, is the result of a nationwide review of primary production managed investment schemes. The review involved a survey of offer documents and surveillance field visits to promoters and advisers of such schemes.
The report also contains the results of an ASIC-commissioned independent survey of investors in primary production managed investment schemes.
ASIC carried out the surveillance campaign during the course of 2002 and reviewed 92 offer documents with respect to 131 managed investments schemes operated by 103 licensed responsible entities. ASIC reviewed 301 client adviser files and conducted interviews with more than 100 investors.