ASIC accepts enforceable undertaking from Macquarie Equities

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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.

ASIC has accepted an enforceable undertaking (EU) from MEL, following surveillance of its compliance systems and a significant number of client files, from December 2011. The compliance deficiencies included:

  • Client files not containing statements of advice
  • Advisers failing to demonstrate reasonable basis for advice provided to the client
  • Poor client records and lack of detail contained in advice documents
  • Lack of supporting documentation on files to determine if there was a reasonable basis for the advice provided to the client
  • Failing to provide sufficient evidence that clients were sophisticated investors

The deficits were initially found by MEL’s own client file reviews dating back to 2008, and were not reported to ASIC. Any attempts to remedy them 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 Chairman Greg Medcraft said this was a major EU, “affecting one of the wealth industry’s biggest players”.

“ASIC is about ensuring investors can be confident and informed and central to this is ensuring financial services are provided efficiently, honestly and fairly,” he said. “Our surveillance found Macquarie Private Wealth fell significantly short of this mark, so ASIC took action.”

The EU will require MEL to develop and implement a plan to rectify any licence risk management and compliance deficiencies, with the oversight of an independent expert. The plan must address ASIC’s concerns, including:

  • Failing to maintain a culture with proper commitment to compliance
  • The effectiveness of its licensee risk processes, controls and systems having regard to the nature, size and complexity of the MPW business
  • Dealing with compliance standards of its advisers in an appropriate and consistent manner
  • Properly addressing recurring issues
  • Ensuring compliance with the obligations on personal advice, general advice and execution-only dealing transactions
  • Ensuring adequate consideration of personal circumstances where advice is given to retail clients
  • Ensuring adequate record keeping and related controls over client records to enable MEL to appropriately supervise its representatives
  • Having appropriate resources available to carry out supervisory services
  • 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.