ASIC managed funds DDO surveillances generate stop orders

Mike Taylor

Managing Editor/Publisher, Financial Newswire

14 September 2022

The Australian Securities and Investments Commission (ASIC) has revealed that it has a number of targeted surveillances underway with respect to managed funds as it moves to impose the weight of the Design and Distribution Obligations (DDO) regime.

The regulator made the admission as it announced it had placed interim stop order on the distribution of two managed funds directly to retail investors in response to what it said were deficiencies in the funds’ target market determinations (TMDs).

It named the funds as the Australian Residential Property Fund and the Private Property Trust No, 30.

The stop orders prevent the responsible entities from issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending investments in the funds under the existing TMDs.

“ASIC made the interim stop orders to protect retail investors from potentially investing in a fund that may not be suitable for their financial objectives, situation or needs. ASIC expects the responsible entities involved to consider the concerns raised about the TMDs for their funds and take immediate steps to ensure compliance,” the regulator’s announcement said.

“If ASIC’s concerns are not addressed, final stop orders will be placed on the funds. The responsible entities involved will have an opportunity to make submissions to ASIC before any final stop orders are made.”

ASIC has placed an interim stop order on Open Corp Funds Management Limited, trading as ResiFund (Resi), in its capacity as responsible entity of the Australian Residential Property Fund (ARP Fund). The ARP Fund comprises the Australian Residential Property Active Fund and the Australian Residential Property Passive Fund, which are stapled together.

The order is valid for 21 days unless revoked earlier.

The ARP Fund solely invests in a portfolio of Australian residential property assets, borrows money to support its investment activities, engages in property development activities and is relatively low in liquidity.

ASIC has placed an interim stop order on Fawkner Property Ltd (Fawkner) in its capacity as responsible entity of Private Property Trust No. 20 (marketed as Essential Services Trust No. 20) (the Trust).

The order is valid for 21 days unless revoked earlier.

The Trust invests in a concentrated portfolio of commercial property assets and borrows money to support its investment activities. Investors in the Trust cannot withdraw their money from the Trust in the first seven years of their investment.