Aggregated News From Investment Management Regulators

Investment funds told to correct advertising and disclosure


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Today ASIC put responsible entities (REs) of all managed investment schemes (MISs) ‘on notice’ that they must ensure their investment fund advertising provides clear, balanced and accurate information.

This follows ASIC’s risk based surveillance of advertising material, website disclosure and product disclosure statements from managed funds during the COVID-19 pandemic. ASIC was concerned to find some funds were providing inadequate information or were not accurately and clearly presenting key features of their investment products.

Examples of the issues that ASIC was seriously concerned about were:

  • Unbalanced comparisons – comparisons focussing on one aspect of a fund (e.g. higher returns), without providing a fair and balanced indication of key differences and risks;
  • Safety and stability representations – promoting the funds as having little or no risk of capital loss, despite the fund’s underlying assets being subject to considerable risk and market volatility; and
  • Withdrawal representations – giving the impression to consumers that it is easy to withdraw funds on short notice, where the liquidity of the fund assets does not support this claim.

ASIC Deputy Chair, Karen Chester said, ‘Following our review, we directly raised concerns with seven REs about their advertising and disclosure in relation to 13 investment funds. Collectively, these funds have approximately $2.5 billion under management. All seven REs have now taken corrective action’.

The seven REs have:

  • ceased advertising of funds and reviewed advertising content;
  • ceased issuing interests in funds until ASIC’s concerns are addressed;
  • withdrawn and replaced product disclosure statements;
  • provided more balanced and prominent disclosure of investment risks and disclaimers;
  • clarified actual withdrawal terms
  • stopped comparing funds to other (lower risk) products on webpages.

Ms Chester said, ‘Most consumers understand that investing in financial products involves some risk. Today with financial risks both greater and more volatile, REs have more than ever a real time responsibility to ensure their advertising and disclosure is ‘true to label’. Put simply, their advertising needs to accurately represent the actual features of their investment products and through economic cycles.

‘Current market uncertainty and volatility brings a heightened imperative for REs to ensure consumers are not misled or misinformed. This is critical when it comes to the investment product’s risk profile, returns and the fund’s liquidity.

‘It is now widely acknowledged that disclosure alone is not enough to protect consumer interests. But balanced and accurate product information, especially about associated risks, remains fundamental  for consumers to have at least a shot at understanding what they are getting into’, she said.

ASIC reminds REs they must ensure their advertising and websites are not misleading or deceptive. Extreme care must be taken when using any terms and phrases which might give the impression that a product is safe or that withdrawals will be available at short notice, especially in the current environment.

ASIC will continue to monitor the advertising and disclosure by managed funds during COVID-19. We are aware of a number of funds that are promoting (implicitly or expressly) their products as ‘high yield‘ or ‘low risk’ when that is not the case. ASIC is considering enforcement action where inappropriate, false or misleading statements could end in significant financial harm to investors.

Prior to promoting financial services or products, firms should consult ASIC’s Regulatory Guide 234: Advertising financial products and services (including credit): Good practice guidance. It contains good practice guidance to help promoters comply with legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.

ASIC also recently warned REs about ensuring that their products are true to label, and their marketing and website information did not make inappropriate comparisons between managed funds and term deposits.

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Regulator Information

Abbreviation: ASIC
Jurisdiction: Australia

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