Pendal has an effective incident management process in place to ensure prompt notification, escalation and rectification of any incidents or potential incidents. The process requires all employees to identify, report and escalate any known or suspected incidents. The Risk & Compliance and Legal functions are stakeholders in the incident management process to assist with assessing the incident, the actions required to contain and rectify the incident and the reporting implications. All incidents involving non - compliance with regulatory requirements, licence conditions or internal policies and procedures, or a breakdown of key controls are assessed by Risk & Compliance to ascertain their significance and regulatory reporting requirements. Significant breaches are reported to ASIC as required by the Corporations Act.
Incidents are governed by the Pendal Incident Management Policy, which is owned by Risk & Compliance. All incidents are reported to the Executive Committee Risk Forum on a monthly basis and the Pendal RE Boards, Managed Investment Compliance Committee and the Audit and Risk Committee on a monthly basis.
An example of the process used to ensure fund criteria is not breached is provided below:
- Regnan data that sets the companies and issuers to be excluded from the portfolio is delivered directly to the Portfolio Management team as well as the Investment Risk team (data management, monitoring and reporting) within our Investment Operations group. This ensures the excluded securities are hard-coded into our trading systems to ensure compliance on a pre- and post-trade basis.
- The Investment Risk team perform the post-trade monitoring on daily basis. In addition, there are hard-coded rules in system that restrict pre-trade activity. This will stop the portfolio from purchasing excluded securities. Any changes in ethical or sustainable ratings will be picked up by the post trade monitoring.
- In case of a breach, e..g a security is no longer classified as sustainable as per monitoring rule mentioned above, the alert notification is immediately sent to the Portfolio Manager of the fund to inform the status of the security. The Investment Risk team works with the Portfolio Manager in managing the resolution of the breach.
- Depending on the nature of the security (liquidity) and financial consideration the security is sold out in feasible timely manner. All Portfolio guidelines breaches are reported to Executive Committee Risk Forum as part of Investment Risk’s monthly reporting, where such items are discussed and noted.