Surveillance by the Australian Securities and Investments Commission found four out of every five fund managers failed some aspect of compliance in the regulator's annual review of the sector.

The operation involved 28 fund managers with $100 billion in assets under management and was conducted in 2016. The regulator said that three entities continue to remain the subject of high-intensity broad-based surveillance.

Responsible entities (REs) were the focus of the surveillance. REs are structures designed to hold assets on behalf of scheme members and were created by the Managed Investments Act of 1998.

ASIC wants to know more about how life insurance is sold on the phone or online. Jim Rice

ASIC said the aims of the review was to show the sector "what good looks like" in so far as treating investors fairly, providing transparent products, balance risk and ensure that clients are fully compensated where losses flow from poor conduct.

Among the key areas of concern identified by ASIC were risk management systems, cyber resilience, levels of professional indemnity insurance, the ability to manage conflicts of interest, dispute resolution processes and whistle-blowing measures.