ASIC warns fundies on “misleading” marketing, wholesale exemption

The Australian Securities and Investments Commission (ASIC) has cast a spotlight on the managed funds industry by commencing surveillance into the marketing of managed funds. The corporate watchdog is looking to catch-out fund managers using misleading performance data and risk representations in their promotional material, whether it be traditional or digital marketing. ASIC Deputy Chair […]

The Australian Securities and Investments Commission (ASIC) has cast a spotlight on the managed funds industry by commencing surveillance into the marketing of managed funds. The corporate watchdog is looking to catch-out fund managers using misleading performance data and risk representations in their promotional material, whether it be traditional or digital marketing.

ASIC Deputy Chair Karen Chester said, “ASIC has broadened our managed fund surveillance, as retail and unsophisticated investors continue to grapple with historically low yields alongside the outlook of even greater global risks and uncertainties.”

It appears that the corporate regulator 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,” said Chester.

Already, a few fund managers have been named-and-shamed for providing misleading or false advertising. These include the Mayfair 101 Group, La Trobe Financial Asset Management and the Skyring Fixed Income Fund.

ASIC’s Regulatory Guide 234 Advertising financial products and services (including credit) sets out good practice and legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.

Regulations stipulate that promoters of managed funds should ensure they are familiar with the principles and guidance set out in RG 234, including:

• Marketing must give balanced messages about returns, features, benefits and significant risks.
• Risk disclosure needs to be clear and prominent.
• The safety, reliability or security of an investment should not be over-stated.
• Comparisons with other products or benchmarks must be appropriate and reasonable.
• Any reliance on past performance must explain that it is not indicative of future performance.
• Care must be taken with the use of images, graphs and tables to ensure they are not confusing or misleading.
• The physical limitations of a medium is no excuse for misleading marketing.
• In addition, Regulatory Guide 53 “The use of past performance in promotional material” (RG 53) provides general guidance to the financial services industry on the appropriate use of past performance information.

The watchdog’s stern message to financial product providers is loud and clear: “If we identify misleading conduct, we will take prompt action to disrupt behaviours by deploying across our regulatory tools – from administrative intervention through to enforcement action if warranted.” Further, ASIC states that physical limitations on social media sites are no excuse for misleading marketing.