'Wholesale investor' term outdated: ASIC
The term ‘wholesale investor’ needs to be updated, according to the Australian Securities and Investments Commission (ASIC), as wealthy investors who haven’t sought advice are being aggressively targeted by some firms.
In a webcast with the Financial Services Council, Rhys Bollen, senior executive leader, investment managers at ASIC, said the Mayfair 101 case was a good example of where a product was not ‘true to label’ and targeted the wrong audience.
The firm’s advertising was found by the Federal Court to have been deceptive and misleading and inaccurately likened the products to term deposits. The firm was targeting wholesale investors, classed as those who were willing to invest $500,000 in a fund but who may not seek advice.
Bollen said: “The term wholesale needs to be updated, it was created in the early 90s and then included in the Corporations Act in 2001. It is a matter for the Government to decide whether it needs to be updated but there has been a lot of change since it was introduced and it is time for it to be reconsidered.
“Mayfair was a clear case of [a firm] targeting unsophisticated, vulnerable, wholesale consumers who were seeking a regular income and higher returns. It had a very aggressive online presence via metadata, sponsored links and Google searches in an attempt to divert investors who were interested in term deposits to invest in Mayfair products.
“We have seen an increase in firms targeting those investors who are avoiding advice.”
He said there were “at least two other firms” being investigated by ASIC of true to label marketing of their products in 2020/21 which were as yet unresolved.
In order to be true to label, ASIC would be looking at whether a fund included the risk/return focus, balanced and meaningful explanation of risk, how returns were calculated and disclosed and appropriate use of benchmarks.
AUTHOR
Laura Dew
Recommended for you
David Sipina has been sentenced to three years under an intensive correction order for his role in the unlicensed Courtenay House financial services.
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
Betashares has named the top Australian suburbs with the highest spare cash flow, shining a light on where financial advisers could eye out potential clients.
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
