Diversified fund receives interim stop orders from ASIC
The Australian Securities and Investments Commission (ASIC) has placed an interim stop order preventing Vasco Responsible Entity Services Limited from distributing the Pivotal Diversified Fund to retail investors.
The order stemmed from concerns regarding the deficiencies in the target market determination (TMD) of the fund, which invested in various managed funds including a private equity fund, hedge funds, and a fund invested in commercial and residential real estate developments.
The interim order stopped Vasco from issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending an investment in the fund. The order was valid for 21 days unless revoked earlier.
The private equity fund was illiquid and leveraged, ASIC stated, while underlying investments in the hedge funds were exposed to a very high risk strategy while trading in listed equities. The investments in property development projects were subject to financial, construction, and valuation risks.
According to ASIC, Vasco had not appropriately considered these risks and features in determining the target market for the Pivotal Diversified Fund and did not meet design and distribution obligations (DDO) as it did not include any distribution conditions.
Additionally, the target market inappropriately included investors with a medium investment timeframe (up to six years) and with a potentially high risk and return profile when the risks associated with the fund’s investment were very high.
Vasco would have an opportunity to make submissions before a decision is made about a final stop order.
This would be ASIC’s 22nd interim stop order to date under DDO. Of these, 20 orders had been lifted following actions taken by the entities to withdraw the product or address ASIC’s concerns.
AUTHOR
Rhea Nath
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