Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Unit trust sales, particularly for diversified overseas products, have taken off in the past two years as more Japanese savers realise the need to invest in capital markets to ensure a financially secure retirement. But distribution, in particular a culture of financial planning and advice, remains embryonic. The funds industry as well as other distributors and the authorities have a stake in seeing investor confidence in unit trusts grow, so errors and poor compliance at key distributors is a potential problem.
The FSA found BMT UFJ had often committed mistakes out of negligence, including the failure to place orders and make erroneous orders, causing losses to customers. Instead of compensating customers for these losses, the bank merely apologised and tried to reconfirm transactions and thereby appear to resolve the matter. In some cases it did compensate customers when they filed complaints.
The bank is the result of a 2005 merger between Bank of Tokyo-Mitsbuishi and UFJ Bank. The latter had an explicit policy of compensating customers in such cases, with a simply apology deemed insufficient; but BTM did not have such provisions, and following the merger the new bank adopted BTM working practices.
ôThe bank is found to have been inadequate in thoroughly enforcing the principle of investor protection...including giving priority to business performance over investor protection,ö says the FSA. Compliance procedures failed and senior managers were unaware of sales errors.
The FSA is calling on the bank to develop and enhance its compliance system and internal controls to create a customer-focused sales system. The bank must present a business plan to implement this by July 11.
Separately, the FSA has given the bank a business improvement order related to its overseas branches, where a number of lapses have been found. Among others: its New York branch has been found wanting by American and Japanese regulators regarding money laundering controls, while a branch manager in Shanghai was caught accepting bribes over procurement.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains