Custodian body concerned about ASIC report

The Australian Custodial Services Association (ACSA) has expressed concern about a recent Australian Securities and Investment Commission (ASIC) report into the custody industry.

The ASIC report 'Custodial and Depository Services in Australia' cited recent incidents in the industry (such as the collapse of Opes Prime and Trio/Astarra) that had created concerns about the safety of assets held by custodians, the duty of care custodians exercise, and whether or not custodians have appropriate internal controls in place.

ACSA "strongly agrees" with a number of the report's focus areas: the importance of "straight through processing"; the active operational risk management culture within the industry, and the reinforcement of the disclosure obligations outlined under the Anti-Money Laundering and Counter-Terrorism Financing Act.

However, ACSA executive Leigh Watson said there were a number of areas in the report ACSA members felt did not reflect the complexity of the industry.

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ACSA pointed out that custodians act on behalf of the responsible entity/trustee, and provide asset segregation and other administrative services - "a point ACSA felt wasn't clear in ASIC's report".

The term 'gatekeeper' was also objected to by ACSA.

"'Gatekeeper' conjures up images that our members feel don't reflect the role custodians play in the financial services sector," Watson said.

 "What ASIC was able to explain was how they see a series of gatekeepers throughout the asset management chain - each with their own roles and obligations to fulfil. In this sense, we agree the custodians play a valuable part in protecting investors' best interests," he said.

ACSA also reinforced its opposition to the replacement of the term 'custodian' with 'depository', since 'custodian' is used and understood globally.