Platforms in the spotlight: ASIC sharpens expectations on investment due diligence

Recent regulatory action highlights ASIC's focus on ensuring Australian superannuation trustees, investment platform operators, and compliance managers act as gatekeepers to protect member savings from unsuitable or poorly-governed products. ASIC Deputy Chair Sarah Court notes that ASIC is "looking at the entire chain, including the conduct of the lead generators; the financial advisers; the superannuation platforms, 'who we think have a real role here'; and the research houses that 'listed these funds as investable'".

The civil penalty proceedings commenced against Equity Trustees Superannuation Limited in relation to the Shield Master Fund typify this sharper stance. ASIC alleges that the trustee failed to exercise the care, skill, and diligence required of a prudent super trustee, breaching obligations under the Superannuation Industry (Supervision) Act and notably section 912A of the Corporations Act. Central to the claim is an alleged lapse in pre-onboarding and ongoing due diligence: thousands of members invested approximately $160 million into a fund with no track record, which later collapsed, eroding their balances. Similarly, ASIC's banning of MWL Financial Services' compliance manager underscores the critical role of compliance as part of the broader industry's governance and control framework.

The Shield litigation aligns with ASIC’s broader data-driven enforcement agenda. Surveillance metrics released in May highlight increased retail investment flows into complex and higher-risk products via choice platforms and SMSF channels. ASIC has identified these trends as a key consumer protection concern and has signalled that it will take enforcement action where trustees or platform operators fall short in their investment selection and due diligence obligations.

In this context, the regulator’s discussion paper on Australia’s evolving capital markets highlights another concern: the rapid growth of relatively opaque and illiquid private assets being introduced onto retail platforms. As these asset classes migrate from wholesale pools into the super system, trustee due-diligence frameworks must evolve to include rigorous, ongoing assessments of investment structure, valuation governance, and liquidity management.

Practically, trustees, platform operators, and compliance managers should expect regulators to test:

• the depth of initial manager and product vetting, including independent verification of performance claims and stress-testing of liquidity assumptions;

• real-time monitoring tools that detect concentration risks or sudden inflows – red flags evident in the Shield affair;

• documented escalation pathways where monitoring triggers adverse findings; and

• board-level oversight demonstrating that member best-interest considerations, rather than commercial distribution imperatives, drive listing and retention decisions.

For IDPS operators, it is important to carefully consider market developments when reviewing the platform's position on offered investments. For organisations that operate both superannuation trustees and IDPSs, it may be challenging to justify retaining a product on one platform after it has been deemed unsuitable and removed from the other.

For super funds and financial services businesses, the message is unambiguous: investment due diligence and compliance oversight are no longer back-office exercises but core fiduciary and operational functions. The banning of a compliance officer serves as a stark reminder of the consequences of failing to uphold these responsibilities. Superannuation trustees and operators that fail to demonstrate robust, repeatable processes – grounded in data, subject-matter expertise, and effective governance – risk enforcement actions that could impact both their reputation and financial stability.

As regulatory scrutiny intensifies, now is the time for trustees, platform operators, and compliance leaders to critically assess and uplift their due diligence and oversight frameworks. Proactive investment in robust risk management, compliance and governance processes is essential, not just to meet ASIC’s expectations, but to protect members and the long-term reputation of your organisation.

If you’d like to discuss practical steps to strengthen your approach, please get in touch.