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Conditions on licensing variation for IOOF

This week, the Australian Securities and Investments Commission (ASIC) imposed further licensing conditions against IOOF Investment Services Ltd (IISL) until they improve their governance practices. This imposition is connected partly to their application for licensing variation.

“ASIC is serious about improving the quality of governance and conflicts management across the funds management sector and ensuring that investors’ best interests are the highest priority of fund managers,” ASIC Commissioner Danielle Press said.

According to the regulator, “IISL sought a variation to its licence to facilitate the transfer of managed investment scheme, investor-directed portfolio services (IDPS) and advice activities from IOOF Investment Management Ltd (IIML) to IISL.”

In reviewing the variation application, the regulator took into account the findings of the Royal Commission into Financial Services with regards to the possibility of continuing conflicts of interest in the wider the IOOF Group.

“ASIC will use its licensing power, including through the imposition of tailored licence conditions, to address governance weaknesses, the risk of poor conduct and vulnerabilities to conflicts of interest in a licensee’s business model.”

The additional licensing conditions, as listed by the regulator, include:

  • Governance: requiring that IISL has a majority of independent directors with a breadth of skills and background relevant to the operation of managed investment schemes and IDPS platforms;

  • Establishment of an Office of the Responsible Entity (ORE): this must be resourced adequately and report directly to the IISL board, with responsibility for:

  1. oversight of IISL’s compliance with its AFS licence obligations;

  2. ensuring IISL’s managed investment schemes are operated in the best interests of their members; and

  3. overseeing the quality and pricing of services provided to IISL by all service providers (including related companies),

  • The appointment of an independent expert, approved by ASIC, to report on their assessment of the implementation of the additional licence conditions.

IISL has agreed to the increased conditions.

Listen to the GRC Professional Podcast with Carole Ferguson and Naomi Burley about applying for licensing variations, as well as the issues upon which ASIC will be focus once a financial entity has applied for licensing variations.

Click here to listen to the podcast.

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