ASIC sues Australian Unity Funds Management for insufficiently screening investors
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The news: ASIC is suing Australian Unity Funds Management in the Federal Court, accusing the investment manager of failing to take reasonable steps to ensure retail investors were in the target market for its Select Income Fund.
The context: The regulator alleges Australian Unity did not sufficiently vet investors in the Select Income Fund to ensure they were in the class of suitable investors identified in three Target Market Determinations made between 5 October 2021 and 5 October 2023.
Although Australian Unity gave prospective investors a questionnaire to determine if a ‘non-advised’ investor was within the defined target market, ASIC alleges that none were reviewed until August 2023 and that the answers were not used for screening until 6 October 2023 despite issuing interest in the fund throughout this period.
Furthermore, in the initial first half of the defined period, only online applicants were provided with the questionnaire, with paper applicants only asked to complete it from September 2022.
What they said: “The design and distribution obligations are there to help make sure consumers get appropriate financial products aligned with their objectives, financial situation and needs,” ASIC deputy chair Sarah Court said.
“Issuers do not meet these obligations just by issuing a questionnaire. They need to actively review investor responses and assess there is nothing in those responses that is inconsistent with the defined target market for the product.
“In this case, we believe Australian Unity’s failure to review the questionnaires completed by prospective investors exposed people who invested in the Fund to the risk that it was not appropriate for them and to potential financial loss.”
The source: ASIC media release
