SMSF exposure to hybrids worrying ASIC
Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft has reinforced the fact that self-managed superannuation funds (SMSFs) will remain under scrutiny with respect to their exposure to hybrid securities.
Outlining the regulator's ongoing focus last week, Medcraft particularly noted the degree to which SMSFs were involved in hybrid securities investments.
He said the regulator was focusing on the sale of hybrids for three key reasons:
- Possible misleading conduct in selling hybrids: For example, spruiking the returns of hybrids without being upfront about the risks involved.
- Risk v return: There has been a lack of institutional investor interest in hybrids in Australia. Some media commentary suggests that this is partly explained by the price offered.
- SMSF risk: Two-thirds of the 75,000 investors in hybrids are SMSFs. This is concerning if those investors are depending on regular payments from their hybrid investment, or their investment will be redeemed after a short period. With hybrids, this is not always the case.
Medcraft said the regulator's continuing work on mitigating concerns around products would be focused on labeling, increased surveillance, investor education and a media campaign outlining the risks involved in such investments.
Originally published by SMSF Essentials.
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