FAAA calls for tougher oversight across all MISs

The Financial Advice Association Australia (FAAA) has called for all managed investment schemes (MISs) to be registered with ASIC, arguing stronger regulatory visibility is needed to reduce the risk of major fund collapses and investor losses.

In a submission to Treasury on enhanced MIS data collection, the association also proposed a formal approval role for ASIC when new schemes are brought to market, particularly those posing elevated risks to investors.

FAAA chief executive Sarah Abood said the association supported stronger reporting requirements for both registered and unregistered schemes, including regular data collection to help regulators identify emerging risks earlier.

The submission recommends collecting information on investment performance exposure to related-party products, fund managers' experience and distribution arrangements, including the use of lead generators and paid marketing.

It also calls for data on complaints, investor turnover, illiquid assets and the extent to which registered schemes invest in unregistered funds. The FAAA said unusually rapid growth, particularly without evidence of strong investment performance, could warrant closer scrutiny.

The association pointed to the Shield and First Guardian collapses as examples of the consumer harm enhanced oversight should seek to prevent.

It also highlighted high social media spending as a potential warning sign, recommending regulators examine whether marketing expenditure could be linked to individual schemes.

"We strongly support proposals to improve the collection and analysis of data on both registered and unregistered MISs, which we believe could help reduce the frequency and scale of MIS collapses and the resultant consumer detriment," the FAAA said.

While acknowledging that additional reporting would impose costs on the industry, the FAAA argued the consumer protection benefits would justify the burden. It favours quarterly reporting, while also supporting a six-monthly alternative, provided information reaches regulators promptly.

The association recommended that ASIC lead the data collection process, with reporting obligations also extending to investment platforms and managed accounts.

The submission follows the FAAA's February response to a separate Treasury consultation on MIS governance, which raised broader issues, including compliance, related-party transactions and financial requirements.