Responsible entities of managed funds offered to retail investors must have compliance plans setting out the steps that will be taken to ensure the funds’ operations comply with the Corporations Act 2001. The obligations include ensuring that funds are not marketed to the public in a misleading or deceptive way.
An ongoing ASIC surveillance of managed funds has raised concerns that some responsible entities must do more to meaningfully oversee the way in which their funds are marketed to investors.
ASIC identified concerns with the marketing of five funds and the oversight of this marketing by four responsible entities during its ongoing surveillance into the marketing of fund performance and risk. Responsible Entity
The marketing concerns ASIC identified varied across the funds. ASIC was concerned that the representations made were not consistent with long-standing regulatory guidance that:
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.
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.
As at the date of this media release, neither ASIC nor a court have made any findings that any of these responsible entities, or any persons or entities associated with these funds (listed in the table above), are in breach of the law. The entities have not made any admissions of guilt or liability.
In response to ASIC’s concerns, all the responsible entities voluntarily amended their marketing materials and practices. They also agreed to amend their compliance plans to enhance their approval and ongoing supervision of fund marketing.
While the compliance plan modifications varied across the funds, they generally included requirements that:
all marketing material be approved by the responsible entity prior to release
all dynamic digital advertising be thoroughly tested by the responsible entity prior to release
marketing material be vetted by external counsel prior to release
marketing material be regularly checked to ensure that it is digitally displayed as approved; or
regular training of personnel involved in fund marketing be conducted.
‘We expect responsible entities to meaningfully supervise their funds management business,’ ASIC Deputy Chair Karen Chester said. ‘As managed fund gatekeepers, they need toonitor, supervise and ultimately approve the fund’s marketing to investors to ensure that it is accurate and reliable.’
ASIC commenced its surveillance of managed fund marketing in October 2021. So far, this surveillance has resulted in:
the responsible entities or trustees of 18 managed funds voluntarily amending their marketing materials and/or practices
an interim stop order on advertisements of PPM Units, a class of interests in RES Investment Fund
an interim stop order on the product disclosure statement for the Private Property Trust No. 20
interim stop order against Responsible Entity Services Limited in response to breaches (of design and distribution obligations)
interim stop order against Fawkner Property Ltd in response to breaches (of design and distribution obligations); and
changes to the compliance plans of the responsible entities identified in this media release.