‘Inadequate warnings’: ASIC takes 18 funds to task over dodgy claims

Marketing material for 18 managed funds has been changed or removed after the corporate watchdog found the advertising contained inaccuracies about the performance of the products.

Almost a year of surveillance by the Australian Securities and Investments Commission (ASIC) found that the funds, with about $1.4 billion in assets under management, had either included inadequate warnings or disclaimers about performance, had compared their product to lower-risk products, indices or benchmarks, or had downplayed risks when promoting fund benefits.

ASIC released a list of the entities responsible for the funds on Thursday, which included well-known brands such as Perpetual and BetaShares.

While ASIC has not made any findings that the entities were in breach of the law, the watchdog said it showed that fund managers must do more to ensure the representations of investment performance in their marketing material is accurate.

ASIC deputy chairman Karen Chester.Credit:

“Our primary concern here is that retail investors and potentially unsophisticated wholesale investors, especially retirees, making important investment decisions based on marketing that does not accurately represent fund performance,” said ASIC deputy chair Karen Chester.

“Investors are entitled to accurate information about the products they may decide to invest in. Responsible entities, trustees and investment managers must ensure that they don’t stray into ‘fair weather’ marketing’.”

BetaShares Capital, a popular provider of exchange-traded funds (ETFs), was found by ASIC to have published material that included information about the past returns of its “Australian Quality ETF” product which was ambiguous, as it didn’t clearly differentiate the returns of the fund and the returns of the index that it intended to track.

In response, BetaShares had “committed to enhancing warnings to disclose the nature of the past performance more prominently”, ASIC said.

Where we find poor conduct, we will take prompt action to protect consumers.

A BetaShares spokesman said the company was working on maintaining high levels of transparency and disclosure.

“Whilst the regulator did not make any adverse findings regarding BetaShares’ compliance with the law, we agreed that there’s an opportunity to more clearly distinguish the historical performance of the index that the fund aims to track from the fund itself, going forward,” he said.

Perpetual Trust Services was also named as the responsible entity for the “FirstMac High Livez” managed investment fund.

ASIC was concerned that the advertisements for the product presented past returns without prominent warnings, and compared returns to the RBA cash rate target that appeared inconsistent with the fund’s assets and strategy.

Perpetual instructed the investment manager to replace the advertising and include additional warnings. A Perpetual spokesman said the company’s corporate trust business acts as a responsible entity for more than 100 registered schemes and 50 investment managers globally.

Almost a year of surveillance by ASIC found that 18 funds had either included inadequate warnings about performance or had downplayed risks when promoting fund benefits.Credit:Karl Hilzinger

“We continue to work closely with the appointed investment managers to ensure schemes meet their regulatory and compliance obligations. We are supportive of ASIC undertaking reviews to ensure that regulatory and compliance obligations are being met,” he said.

“We believe that ASIC’s concerns have been addressed and we will continue to work collaboratively with the investment manager to ensure that the FirstMac High Livez product complies with all its regulatory obligations.”

Other responsible entities named by ASIC included AMAL Trustees, Australian Secure Capital Fund, Balmain Fund Administration, Boutique Capital, CFMG Equity and Income Funds, Collins St Asset Management, CTSP Funds Management, Truepillars RE, VentureCrowd Nominees, VT No 2, and Wentworth Williamson Management.

Chester said that by letting the entities know about their concerns, they were able to get them to amend their material in a timely and voluntary way.

“ASIC’s surveillance into marketing of fund performance and risk is ongoing. Where we find poor conduct, we will take prompt action to protect consumers and hold responsible entities, trustees and investment managers to account,” she said.

“We will deploy a range of regulatory interventions, from our recent use of stop orders through to court action where warranted.”

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