The Australian Securities and Investments Commission (ASIC) has called out nine more managed funds for alleged marketing misdemeanors as part of a more than year-long crackdown on the sector.
ASIC said in a release last week that the five of the funds and their respective ‘responsible entities’ (akin to trustees) may have made marketing claims that “were not consistent with long-standing regulatory guidance”.
“In examining the quality of the responsible entities’ oversight of the marketing by their investment managers, ASIC identified a need for more robust marketing approval processes to ensure only approved advertising is used,” the statement says.
Separately, the regulator also put interim stop orders on three funds offered by Australian Fiduciaries and one sold by APS Savings for breaching new product design and distribution obligations (DDO).
The latest ASIC fund spanking follows a spate of similar regulatory warnings lobbed against managers for over-enthusiastic marketing or breaches of various rules including DDO.
Just a week prior, for example, the corporate cop slapped two Perpetual products (the Pure Microcap Fund and the Geared Australian Share Fund) with interim stop orders for faulty ‘target market determinations’ – a key document in the DDO book of rules. The Perpetual Geared Australian Share Fund is offered in NZ under the trans-Tasman Mutual Recognition regime (TTMR).
In a release at the time, ASIC said it “has targeted surveillances underway to check whether product issuers and distributors are complying with DDO”.
“Where firms are not doing the right thing, ASIC can take quick action under DDO to disrupt poor conduct and prevent potential consumer harm,” the statement says.
The five products pinged in the recent ASIC action include the Allan Gray Australia Stable Fund and the Eley Griffiths Emerging Companies Fund – both of which are registered for sale in NZ via TTMR.
ASIC noted the five funds pulled up last week may have overstepped various marketing guidelines such as requirements for:
- projected fund performance must be reasonable and include prominent and proximate qualification or warnings;
- promotion of fund benefits requires prominent and proximate balancing risk disclosure;
- comparisons of funds with other products must be appropriate and reasonable; or
- recommendations should be attributed and testimonials should be appropriate and reasonable.
Since launching a “surveillance” campaign on the Australian retail funds industry last October ASIC notes that “responsible entities or trustees of 18 managed funds” have opted to change “their marketing materials and/or practices”.
Karen Chester, ASIC deputy chair, said in a statement: “We expect responsible entities to meaningfully supervise their funds management business. As managed fund gatekeepers, they need to monitor, supervise and ultimately approve the fund’s marketing to investors to ensure that it is accurate and reliable.”
The Australian regulator to date has issued 17 interim stop orders under DDO rules with six still in place.