PKF admits to contraventions concerning independent expert report engagements

ASIC

ASIC has accepted a court enforceable undertaking from Australian Financial Services (AFS) licensee PKF Melbourne Corporate Pty Ltd (PKF).

ASIC conducted an investigation which reviewed files related to three independent expert report (IER) engagements. ASIC held concerns that PKF failed to have:

  • documented internal policies and procedures demonstrating compliance with its AFS licensee obligations and ASIC’s regulatory guidance,
  • internal policies on valuation methodology selection and application,
  • documented its assessment of the competence of the technical specialists or its review of their reports,
  • robust processes and procedures for managing conflicts of interest to ensure the absence of any conflicts prior to and during IER engagements, and
  • processes of review of its internal policies and procedures to account for any changes in law, regulatory guidance, or professional practice.

PKF admits this conduct meant it did not ensure:

  • the financial services covered by its licence were provided efficiently, honestly, and fairly, and
  • it had adequate arrangements for the management of conflicts of interest, in contravention of paragraphs 912A(1)(a) and 912A(1)(aa) of the Corporations Act 2001.

ASIC Deputy Chair Sarah Court said, ‘This outcome reinforces ASIC’s previous messaging to independent experts to regularly review internal policies and procedures to ensure they are sufficiently documented and applied.’

‘Independent experts play a gatekeeper role in corporate transactions, and their reports are relied on by investors to make economic decisions. Robust policies and procedures mitigate the chances of reports containing misleading opinions and allow experts to demonstrate compliance with their statutory obligations.’

Under the terms of the undertaking, PKF will cease providing IERs until an independent expert completes a review of PKF’s policies and procedures for IER engagements and PKF has implemented all recommendations of this review.

This undertaking replaces PKF’s voluntary undertaking provided to ASIC in March 2024, that it would not accept any new IER engagements while ASIC’s inquiries were ongoing.

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Court enforceable undertaking

Background

Independent experts as gatekeepers

Firms that provide independent expert reports must be authorised to provide general financial product advice for certain corporate transactions. These services are often provided by multi-disciplinary accounting and consulting firms. Many firms provide this service through a special purpose corporate vehicle that has an AFS licence.

Along with some auditing and insolvency services, independent expert reports are one of the few services offered by accounting and consulting firms that are regulated by ASIC.

In November 2023, ASIC highlighted that conduct of gatekeepers, such as AFS licensees, is an enforcement priority for ASIC in 2024.

When ASIC may accept a court enforceable undertaking 

ASIC may accept a court enforceable undertaking to improve and enforce compliance with the law. Court enforceable undertakings are not always used as an alternative to other enforcement action, they can also be used to complement or enhance such actions.  

ASIC will not usually accept a court enforceable undertaking:  

  • instead of pursuing criminal court proceedings,
  • where the misconduct is deliberate or involves a high level of recklessness, or 
  • after a matter has been referred to an ASIC delegate or another specialist body. 

ASIC generally requires that a court enforceable undertaking contains admissions that the party providing the undertaking contravened legislative provisions. If the party does not comply with the undertakings, ASIC will seek to enforce the undertaking through the court.  

Further guidance on how ASIC uses court enforceable undertakings can be found in Regulatory Guide 100 Court enforceable undertakings (RG 100).  

View ASIC’s Court Enforceable Undertakings register. 

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