Industry bodies support MIS review

In a statement, Financial Services Minister Stephen Jones said the MIS review will examine whether the regulatory framework is fit-for-purpose, identify potential gaps, and consider what enhancements can be made to reduce undue financial risk for investors.

The SMSF Association has thrown its support behind the federal government’s decision to initiate a Treasury review.

SMSF Association chief executive officer Peter Burgess said: “We welcome this announcement and look forward to making a submission. Over the years, self-managed super fund (SMSF) members have lost millions of dollars via failed MIS, so any review and subsequent recommendations that strengthen investor protections must be a positive not only for SMSFs but the entire superannuation sector.

“Certainly, we believe it’s appropriate for the review to consider reform options surrounding wholesale investor thresholds and whether certain MIS should be permitted to be marketed to retail clients.”

Mr Burgess added that the review should also consider whether MIS should be included in a compensation scheme of last resort (CSLR) for retail investors.

“Other issues that need addressing include examination of the classes and types of MIS, and, where applicable, consider changes to the regulation of certain classes of MIS, and the regulatory framework, including the approval of product disclosure statements,” he said.

“The gaps between state and Commonwealth regulations, including those identified in the Sterling Income Trust Inquiry — its recommendations were handed down in February 2022 — also need to go under the microscope.”

The FSC also backed the review, with chief executive Blake Briggs saying it could help clarify the funds management industry’s reputation.

“The MIS review is an opportunity to demonstrate the sector is consumer-focused and well-regulated, whilst also identifying opportunities to eliminate fringe operators that damage the reputation of the broader industry and pose risks to consumers,” Mr Briggs said. 

“The FSC supports the government’s decision to emphasise the MIS review’s focus on whether the wholesale investor test is appropriate as the test and its thresholds were set in 1991 and have not been reviewed since 2011.

“The MIS review should support an effective and efficient regulatory regime which does not impede consumer choice or increase regulatory costs for fund managers that are behaving responsibly, as this would ultimately flow through to consumers, including through their superannuation savings.”

The FSC, however, disagreed with the SMSF Association’s view that the review should consider bringing MIS under the CSLR.

“The MIS review is right not to focus on whether the managed investment schemes should be brought within the scope of the compensation scheme of last resort as the regulatory framework should target fringe operators so that the issue of unpaid compensation does not arise.”

Treasury is scheduled to release a public consultation paper by mid-year and consult with industry before reporting findings to government by early 2024.