ASIC has issued interim stop orders preventing Australian Fiduciaries Limited (AFL) and APS Savings from offering or distributing three funds to retail investors because of deficiencies in their target market determinations (TMDs).

ASIC announced the moves on Friday morning. All orders are valid for 21 days unless revoked earlier.

The interim orders were made to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs. To date, ASIC has issued 21 interim stop orders under the design and distribution obligations (DDO), including the orders for these funds.

APS Savings

APS Savings is an unlisted public company seeking to raise funds through the issue of secured notes (APS Notes) under a prospectus. APS Savings proposes to lend the funds raised to its parent company APS Benefits Group Limited, which will use these monies to fund personal loans for its members.

Amongst other concerns, ASIC considered that the TMD for APS Savings did not adequately describe the objectives, financial situation and needs of consumers likely to be in the target market in an objective manner.

ASIC also found that the TMD for the prospectus did not meet the appropriateness requirements under DDO. The distribution conditions in the TMD were limited to identifying investors who had completed investment application forms and were willing to make a minimum investment of $10. There were no additional processes to identify investors as being within the target market. These distribution conditions are unlikely to result in the product being distributed to consumers in a suitable target market.

Further, ASIC considered that the TMD’s initial and subsequent review periods were not reasonable. This meant that if the TMD was no longer appropriate, retail clients may be exposed to significant detriment.

ASIC expects APS Savings to consider the concerns raised regarding the TMD and take immediate steps to ensure compliance. ASIC will consider making a final order if its concerns are not addressed in a timely manner. APS Savings will have an opportunity to make submissions before a decision is made about a final stop order.

Australian Fiduciaries Limited

ASIC issued interim stop orders preventing Australian Fiduciaries Limited (AFL) from offering or distributing three funds to retail investors because of deficiencies in their target market determinations (TMDs).

The funds are:

  • Global SRI Ethical Alpha Fund
  • Global SRI All Seasons Fund
  • Global SRI Multi-Strategy Fund

The interim orders stop AFL from issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending an investment in the funds. The orders are valid for 21 days unless revoked earlier.

Both Global SRI Ethical Alpha Fund and Global SRI Multi-Strategy Fund have exposure to a portfolio comprised largely of loans secured by real property and other debt instruments, precious metals, listed and unlisted equity and property development projects.