La Trobe Financial Asset Management has been ordered to pay a $750,000 fine by the Federal Court after being accused of false and misleading marketing by the Australian Securities and Investments Commission (ASIC).
In his decision on the matter, Justice O’Bryan said that the conduct of the fund was serious “and had very considerable potential to mislead the public about the characteristics of the investment options – both as to the entitlement to withdraw funds and the risk of loss of capital invested.”
The court found that La Trobe’s use of the word “stable” across its advertising in newspapers, magazines and on websites implied that there could be no loss of capital by investors, and that this constituted a misrepresentation of the risk involved with the fund.
Justice O’Bryan also took issue with La Trobe’s claim that investors in the fund’s “48 Hour Account” and “90 Day Account” would be able to withdraw their funds between 48 hours and 90 days of providing withdrawal notice.
In reality, the fund had up to 12 months to satisfy a withdrawal request and, should the fund cease to be liquid, investors were only entitled to a withdrawal in the event that such an offer was made by La Trobe.
ASIC asserted that La Trobe’s statements about the fund failed to express in “a sufficiently prominent manner” the level of risk associated with it.
ASIC deputy chair Karen Chester said that consumers need to be provided with accurate information that doesn’t mislead them.
“This case serves as yet another warning that ASIC will take action where investments are marketed to consumers as safer, lower risk or more liquid when they are not,” she said.
Ms Chester pointed to ASIC’s True-To-Label Initiative and warned funds not to leave out or omit essential details for any financial product or service.
“When consumers are considering investments, they need to be provided with accurate information that doesn’t mislead them,” she said.
“ASIC was concerned that these investment products were being sold as stable and more liquid when they were not, and essential detail was being left in the fine print.”
Can you please tell me who pays the fine? Is it deducted from the fund so investors actually pay?
LaTrobe provide a PDS that explains to the “Intelligent, all capable” investor everything there is needed to know before making an “Independent and Intelligent” decision without the “unnecessary and expensive” Advice provided by a Financial Planner. I wonder if it was one of our major non-competitive banks that lodged the complaint?????????
People obviously have short memories in their recollections of the Mortgage Trust Blow Ups in 2008. A mess.
All of this information is no doubt disclosed within the PDS properly and therefore investors are appropriately advised of the risks.
Oh wait.
Does this case mean that ASIC acknowledge that the PDS they require to be provided to investors is a document that is far to complex for an investor to understand or more likely an acknowledgement by ASIC that no investor every reads the PDS. So we had better do something.
You have to feel for poor ASIC here trying to clean up the mess that they have created.
didn’t their minister also say that as long as people are provided these documents it is up to them to take responsibility for their own decision……….
It’s ok because you now you have to issue a TMD to go with the PDS.
So now we suppose ASIC will check that advisers who advised clients on the fund had in the SOA that La Trobe had up to 12 months to satisfy a withdrawal request which you would expect to be in SOA
Accusations of false and misleading marketing – hey ASIC, when are you going to take Industry Super Funds to court.
Even APRA’s Heat Map confirmed that so called Industry Balanced Funds held 94% Growth Assets.
But of course this will not happen as ASIC will never hurt Industry Super : – /
How is this a heavy toll? $750,000 fine for funds under management of $5.15bn. That’s only 0.0146% of FUM. It’s like fining an adviser with $100m of FUM the ‘heavy’ sum of $14,600. Big deal. If we were convicted of false and misleading marketing, we’d lose our AFSL and probably get locked up. But not Big Business!
Oh well, at least ASIC is being timely in their monitoring. The 48 hour account has only been running for more than 7 years…
LOL Imagine if ASIC had to refund 5 years of “monitoring & supervision” fees because of their failure to meet the terms of their contract.