Why researchers must be held accountable

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Is ASIC right to be setting its sights on the quality of investment research? One major research house certainly thinks so.

Research house Lonsec said ASICs updated policy guidance will raise the bar on professionalism in research.

ASIC highlighted the fact that indirect payments from product issuers to research houses can be far less transparent than direct payments and unobvious to the user of the research. They share the potential to negatively affect the independence and integrity of the overall research process.

Under the updated policy guidance indirect payments will be subject to the same disclosure requirements as direct payments from product issuers.

Lonsec CEO Amanda Gillespie said the guidance will help to manage conflicts of interests and improve confidence in the independence and quality of research.

“It is pleasing that ASIC has acknowledged that indirect conflicts can be as potentially corrosive as direct conflicts to the integrity of the research and that it will not require the latter to be banned,” said Gillespie.

"It is important that all participants in the advice chain play their part in ensuring investors make well informed investment decisions.”

With advisers being subject to FoFA reforms, she said it was entirely appropriate that research houses are now held accountable too.

"A robust research industry with strong participants and sufficient choice is an important element for financial advisers and the industry as a whole," Gillespie said.