ASIC invokes interim stop order after TMD concerns
The Australian Securities and Investments Commission (ASIC) has made an interim stop order on a fund investing in shopping centres because of a non-compliant target market determination (TMD).
Australasian Property Investments (APIL) was prevented from offering or distributing the APIL Essential Retail Income fund to retail investors.
This prevented APIL from issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending investment in the fund for 21 days, unless revoked earlier.
The Fund was invested in two shopping centres and currently raising money to purchase a third, using borrowed money to support its investment activities. Investors were unable to withdraw their money until April 2029 and APIL stated the money invested was not guaranteed and the monthly income distributions were based on assumptions.
As a result, ASIC felt the fund was unsuitable for the market defined by the TMD which included investors:
- looking to invest in commercial properties with the prospect of capital growth and a secure income stream;
- who are ‘cash rich’ entities or retirees looking for a long-term capital investment along with a monthly return;
- with a ‘buy and hold’ strategy and do not require immediate access to capital; and
- with a need for preservation of capital that accrues capital gains/losses over the lifespan of the investment.
ASIC also found that APIL did not meet the information requirements for the TMD or the appropriateness requirements under the design and distribution obligations (DDO) because the distribution condition was inadequate – it relied solely on investors' self-certification that they were in the target market.
ASIC said it expected APIL to consider the concerns and take immediate steps to ensure compliance.
If ASIC’s concerns were not addressed in a timely manner, a final stop order would be placed on the Fund. APIL would have an opportunity to make submissions to ASIC before the final stop order was made.
AUTHOR
Laura Dew
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
