Should I ‘change up’ my Compliance Committee to improve my Registered MIS Governance?
With ASIC recently ‘looking under the hood’ of registered Managed Investment Schemes and their Compliance Plans, should funds manager Boards ‘change up’ their approach to how their Compliance Committee is trying to protect the interests of investors?
Introduction
The Compliance Committee term is used for various purposes within the Australian Financial Services landscape. In this article I am referring to the Compliance Committee of a registered Managed Investment Scheme (‘MIS’), where the committee is actually required by law. The MIS in an Australian context would be known as a pooled investment in other jurisdictions.
What is a Registered Scheme Compliance Committee?
The Compliance Committee is a group of professionals where the majority must be external to the fund manager. I think of it like the external members of the committee are similar to independent directors of a company, and are expected to bring an independent view to the committee table.
The Compliance Committee monitors the operation of the registered MIS and the adequacy of the scheme's compliance plan. Managed Investment Schemes that are registered with the Australian Securities and Investments Commission (‘ASIC’) can be wholesale schemes or retail schemes.
Generally speaking, a registered scheme is structured to allow investment from retail (‘mum and dad’) investors. Some funds managers also register their wholesale funds to demonstrate their commitment to compliance and to provide additional safeguards for investors, for example, via the compliance plan and the Compliance Committee’s engagement.
ASIC looks ‘Under the Hood’ of Responsible Entities
ASIC published a review at the start of June 2025, following their ‘looking under the hood’ of Australian Financial Services Licence (‘AFSL’) holders that are Responsible Entities (‘REs’). (REs must hold an AFSL and be a public company with at least three directors).
The combined total of funds under review totalled nearly AU$1 trillion of ASIC registered managed investments under management.
ASIC assessed 50 compliance plans used by REs in the operation of a combined 1,471 funds and found that most of the compliance plans failed to adequately address the most important requirements across the design and distribution obligation (‘DDO’), internal dispute resolution and reportable situations regimes.
For example, ASIC found that some plans failed to address areas such as DDO, which suggests the RE, the RE Board and the RE Compliance Committee haven't meaningfully reviewed their Compliance Plan since 2021. (Product design and distribution obligations came into force in October 2021).
Death, Taxes and ASIC
There are said to be two certainties in life – death and taxes. I’d like to add a third:
ASIC will provide updated direction and make changes to the regulatory guides of how financial services is governed in Australia every year, often based on regulatory changes imposed by the Government of the day.
Some years, there are significant regulatory changes, for example DDO mentioned above. Sometimes, the changes can be more subtle. However, whether the changes are small or large, the way financial services is supervised and the laws enforced will be updated regularly and is constantly evolving.
For example, late last year, the Federal Government introduced new laws regarding Anti Money Laundering and Counter-Terrorism Financing (‘AML/CTF’), Privacy Laws and Cyber Security. These changes to the law all impact the compliance and governance of financial services participants.
Challenges to Financial Service Firms
While some financial services firms and their boards may bemoan the number of ASIC updates, and the rate of change to law and obligations, these legislative and policy amendments are necessary to keep pace with the changes to the society in which we all participate. The Government, ASIC and other regulators such as AUSTRAC, are seeking to discharge their duties effectively to protect Australian consumers.
The challenge to financial services firms is to have relevant resourcing and external service providers, such as governance experts and lawyers, to assist these boards to discharge their fiduciary responsibilities effectively. ‘Set and forget’ is not a valid strategy for Compliance Plans.
Solutions to Comply
The example listed above regarding MIS Compliance Plans not being updated regularly is understandable and not uncommon. Most plans did not pass the ASIC assessment of being up to date. However, best practice would suggest that the Board of the RE and the Compliance Committee should place greater emphasis on reviewing their compliance plans more regularly so that the plans keep up with the rate of change enforced by Government and the regulators.
Ultimately, the company board and its directors are responsible for meeting their numerous governance, compliance and record keeping obligations. Under the Australian Financial Services Licensing regime, there can be severe penalties for not complying with your obligations.
Can I help your Board comply with your obligations?
As a Chartered Governance Professional with the Chartered Governance Institute, I can be a key external partner to the Board of a company that has significant compliance obligations, such as an AFSL holder or an Australian Credit Licence holder.
I am available to have a no obligation conversation about joining your Compliance Committee or advising your Board on your processes and providing a fresh approach to your compliance obligations.
Conclusion
Drawing on my two decades of board experience and multiple Compliance Committee roles, I can greatly assist your board to achieve excellent levels of governance, risk management and compliance with your record keeping obligations, by joining your compliance team and providing external, unbiased and independent governance advice.
The times will keep changing, laws will be updated, and compliance regulations will be amended.
Let me assist you to build a better business by allowing you more time to do what you are good at by engaging with a Chartered Governance Professional to bring your MIS governance to the next level.
https://www.andrewsmcneil.com/