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Marketing managed funds – ASIC surveillance – Fund Management/ REITs



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ASIC’s recent surveillance of responsible entities and
trustees of investment funds has resulted in 13 fund managers
taking action to amend their marketing materials. ASIC’s
surveillance focussed on the impact of marketing on retail and
unsophisticated wholesale clients, with the primary concerns
relating to misleading or ambiguous performance or risk
representations.

ASIC’s Surveillance and Key Findings

It is important to note that ASIC’s surveillance included
unregistered funds targeting wholesale investors and the issues
that were identified by ASIC as problematic apply to the promotion
of these funds in the same way as to funds targeted at retail
investors.

ASIC’s surveillance identified a number of concerns, which
all fund managers should take note of, including:

  • Inadequate warnings or disclaimers about past or future
    performance;

  • Comparisons that were not appropriate, including comparing the
    product to lower-risk products, indices or benchmarks;

  • Downplaying the risks of the product.

The surveillance examined the risk and performance
representations made in managed fund marketing – including
both traditional and digital media marketing. ASIC’s Deputy
Chair, Karen Chester states

“ASIC remains concerned that managed fund promoters
continue to target consumers, particularly retirees or those
planning for retirement, with ambiguous or misleading performance
and risk representations. Where we identify fund marketing of
concern, we will also review the corresponding product disclosure
statements, websites and target market determinations to assess if
the marketing claims are
misleading.”1

Action to Take

Fund managers responsible for the promotion of registered and
unregistered funds should ensure:










Warnings and disclaimers are adequate

This means the warning must:


· be sufficiently clear, prominent or close to the claim
to which the warning relates;


· be included in all media, not just traditional
media;


· include relevant risk information and provide
assumptions underlying target returns (where applicable).


· where the disclaimer relates to past performance,
ensure that it is accurate;

Claims about performance and target returns are
reliable

This means they must be benchmarked appropriately, based on the
fund’s assets and strategy. It is important that marketing
material does not overstate the safety, reliability or security of
an investment.

Comparisons are appropriate

This means that:


· fund managers must compare their product with another
product that has similar features and risks;


· comparisons should be consistent with the fund’s
assets and strategy and be reasonable.

Sources for claims of performance are
referenced

One piece of promotional material in ASIC’s surveillance
included the claim that the fund was “best
performing
” with no source or date for the claim. Claims
like this should always include an appropriate source and date to
ensure they are not misleading or deceptive.

Footnote

1ASIC Scrutinises Marketing of Managed Fund
Performance and Risks

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Sophie Grace Pty Ltd

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