ASIC has made interim stop orders preventing MPG Funds Management from offering or distributing two trusts to retail investors due to deficient target market determinations (TMDs).
The interim orders stop MPG from issuing interests in, giving a product disclosure statement for, or providing general advice to retail clients recommending investments in the MPG Bulky Goods Retail Trust and the MPG Essential Services Property Trust.
ASIC said that it made the orders to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs.
“The trusts are solely invested in a concentrated portfolio of commercial properties. They have an investment term during which investors have no ongoing withdrawal rights and employ leverage, which increases the level of risk for investors,” the regulator explained.
“ASIC is concerned that MPG has not appropriately considered these features and risks in determining the target markets for the trusts.”
According to ASIC, the TMDs for the two trusts include investors with a tolerance for an undefined “medium risk” wanting stable and regular income distributions, and needing liquidity or needing to make withdrawals during the investment term for the trusts.
“ASIC also considered that the distribution conditions in the TMDs did not meet the appropriateness requirement under the design and distribution obligations (DDO) because these conditions were not specific enough to make it likely for the Trusts to reach consumers in the target market,” it added.
Furthermore, ASIC stated that the TMDs did not adequately specify the information that distributors must report for MPG to promptly identify the occurrence of a review trigger (or any event or circumstance) that would suggest that the TMDs were no longer appropriate.
They also did not adequately specify the period for reporting this information to MPG and the review triggers for the TMDs.
“ASIC expects MPG to consider the concerns raised regarding the TMDs and take immediate steps to ensure compliance,” the regulator said.
“ASIC will consider making a final order if its concerns are not addressed in a timely manner. MPG will have an opportunity to make submissions before a decision is made about a final stop order.”
A total of 15 DDO interim stop orders, including the interim orders for the MPG trusts, have been issued by ASIC to date. The regulator reminded issuers that they must define target markets for their products appropriately, having regard to the risks and features of their products.
