ASIC today accepted an enforceable undertaking (EU) from Macquarie Equities Limited (MEL) following a surveillance that found some recurring compliance deficiencies by and in the supervision of MEL’s advisers.
MEL is a subsidiary of Macquarie Group Limited and is authorised under its Australian Financial Services licence to offer financial advice. MEL carries on a financial product advice business in Australia under the name Macquarie Private Wealth (MPW).
The EU followed an ASIC surveillance started in December 2011, which reviewed MEL’s compliance systems and a significant number of client files.
ASIC found MEL had failed to address recurring compliance deficiencies that involved a significant number of its advisers. These deficiencies were initially identified by MEL’s own client file reviews dating back to 2008. Specifically, the deficiencies include instances of:
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client files not containing statements of advice
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advisers failing to demonstrate reasonable basis for advice provided to the client
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poor client records and lack of detail contained in advice documents
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lack of supporting documentation on files to determine if there was a reasonable basis for the advice provided to the client, and
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failing to provide sufficient evidence that clients were sophisticated investors.
ASIC’s review found these deficiencies, which were not reported to ASIC, to be serious and that any remediation initiatives attempted by MEL over a four year period had been ineffective.
MEL has agreed to a review of its Macquarie Private Wealth business, including its licence risk and operating model and systems and its legal and regulatory obligations.
ASIC was concerned that the responsibility for compliance sat within the MPW business and MEL has taken steps to integrate compliance within and reporting to the Macquarie Group-wide compliance function.
ASIC Chairman Greg Medcraft said: ‘ASIC is about ensuring investors can be confident and informed and central to this is ensuring financial services are provided efficiently, honestly and fairly.
‘Our surveillance found Macquarie Private Wealth fell significantly short of this mark, so ASIC took action. This is a major EU affecting one of the wealth industry’s biggest players, which we believe will rectify some serious compliance deficiencies,’ Mr Medcraft said.
The EU requires MEL to develop and implement, with the oversight of an independent expert, a plan to rectify any licence risk management and compliance deficiencies. The plan will address ASIC’s concerns set out in the EU including:
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failing to maintain a culture with proper commitment to compliance
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the effectiveness of its licensee risk processes, controls and systems having regard to the nature, size and complexity of the MPW business
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dealing with compliance standards of its advisers in an appropriate and consistent manner
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properly addressing recurring issues
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ensuring compliance with the obligations on personal advice, general advice and execution-only dealing transactions
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ensuring adequate consideration of personal circumstances where advice is given to retail clients
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ensuring adequate record keeping and related controls over client records to enable MEL to appropriately supervise its representatives
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having appropriate resources available to carry out supervisory services, and
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appropriate assessment of breaches and reporting to ASIC.
The independent expert will report regularly to ASIC over the next two years on MEL’s implementation of the plan.
If the review identifies a client has been adversely impacted due to the failings of a MEL representative, then MEL is obliged to notify ASIC of the circumstances and to remediate the client where appropriate.