Four interim stop orders issued by ASIC
The Australian Securities and Investments Commission (ASIC) has placed interim stop orders on four funds in response to target market determination (TMD) deficiencies.
The first three related to funds offered by Australian Fiduciaries Ltd which were Global SRI Ethical Alpha, Global SRI Multi-Strategy and Global SRI All Seasons.
The first two funds had exposure to a portfolio comprised largely of loans secured by real property, precious metals, listed and unlisted equity and property development projects. The third included unlisted managed funds, listed equity and commodities.
ASIC said the target market for the three funds was inappropriate as it included:
- Investors who needed liquidity during the term of their investments, which was not supported by the Funds’ liquidity features
- Investors with a tolerance for ‘medium’ to ‘high’ level of risk whilst the risks associated with the portfolio of investments for two funds and the aggressive return objective of one fund were higher; and
- Investors with an undefined ‘higher-than-average’ net worth.
Furthermore, the TMDs did not meet the appropriateness requirements under DDO because they failed to include any distribution conditions.
The interim orders stopped AFL from issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending an investment in the funds.
The fourth stop order related to APS Savings Ltd, an unlisted public company seeking to raise funds through secured notes. It proposed it would lend these funds to its parent company, APS Benefits Group, which would use it to fund personal loans to members.
ASIC found the TMD did not adequately describes the objectives, financial situations or needs of consumers likely to be in the target market.
The distribution conditions in the TMD were limited to identifying investors who had completed investment application forms and were willing to make a minimum investment of $10, ASIC said. There were no additional processes to identify investors as being within the target market. These distribution conditions are unlikely to result in the product being distributed to consumers in a suitable target market.
The orders were valid for 21 days unless revoked earlier and the firms would have the opportunity to make submissions before a final decision was made.
AUTHOR
Laura Dew
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