In this edition:
- Second anniversary of ASX CGPRs: Report sets a baseline for compliance
- Loss of licence: ASIC gets serious
Second anniversary of ASX Corporate Governance Principles and Recommendations: Report sets a baseline for compliance
Almost two years after the ASX Corporate Governance Principles and Recommendations (CGPRs) came into effect, the ASX has release its commissioned report prepared by KPMG, (the Report) examining the disclosure of ASX-listed entities against the CGPRs in their first full year of reporting.
The Report does not address all the CGPRs, only those recommendations which were new or revised in the 3rd edition. See our earlier blog for more information on the new and revised CGPRs.
Unsurprisingly, KMPG found a positive correlation between the size of the ASX-listed entity (S&P/ASX 200), the adoption of the CGPRs and the adequacy of disclosure of information by the entity.
It also observed, that there appears to be ‘significant confusion’ about the role of Appendix 4G, with many entities assuming that it was sufficient to note they had adopted a recommendation in their Appendix 4G. KPMG has now recommended the ASX make it clearer to entities that the Appendix 4G should not be used as a substitute for disclosures ‘normally made’in the Corporate Governance Statement (CGS).
Some other key insights included:
- Board skills matrix:There was significant variation with how entities approached this. However, those entities that cross-referenced the CGS or Appendix 4G to the relevant sections of the director’s report were found to be left wanting in meeting this requirement;
- Shareholder communication on website:The Report looked at the accessibility of information on entity websites and found that those sectors with a traditionally low volume of customer traffic (industrials, energy, minerals) made their corporate governance section more accessible compared to those with a high volume of online customers (consumer discretionary);
- Risk management: Although the majority of entities confirmed their policy is to review the risk framework annually, many entities failed to confirm they had actually undertaken a review in the reporting period. KPMG noted that disclosure could be improved by providing further insight into the risk management framework review, to enable stakeholders to understand the scope of the review; and
- Shareholder information for director election or re-election: While the skills and experience of directors was well-represented in most Notice of Meetings, only 54 per cent of entities disclosed if the board considered a director to be independent. Entities should ensure that they provide complete information to shareholders in the Notice of Meeting.
Loss of licence: ASIC gets serious
In the last six months or so, ASIC has cancelled the licence of two fund managers providing wholesale financial services for failing to comply with the licence conditions.
In the case of Dunfo Capital, which operated of an unregistered managed investment scheme and provided custodial and depository services to wholesale clients, it failed to:
- meet its Net Tangible Asset (NTA) requirements;
- maintain the competence to provide financial services;
- comply with the requirements for changing or removing a key person condition; and
- also failed to notify ASIC of breaches within 10 business days.
It was a similar story for TML Index Limited (formerly Fish Capital Securities Ltd) a wholesale fund manager that failed to meet its NTA requirements, maintain adequate and competent staff, lodge accounts and notify ASIC of breaches.
ASIC’s latest cancellations demonstrate that ASIC is ramping up its efforts to improve standards across the financial services industry, including, the conduct of licensees that provide financial services to wholesale clients.