ASIC hits Aust Unity FM with interim stop order

The Australian Securities and Investments Commission (ASIC) has hit Australian Unity Funds Management with an interim DDO stop order largely because the fund manager sought to use a retail client questionnaire with significant flaws.

ASIC said the stop order applied to Australian Unity Funds Management issuing or distributing interests in the Australian Unity Select Income Fund to retail clients and was in response to concerns that the firm had failed to take reasonable steps.

“ASIC’s concerns related to Australian Unity’s reliance on a retail client questionnaire with significant flaws as a key step for compliance with its obligations. When applying for interests in the Fund, retail clients who have not received financial advice must respond to Australian Unity’s questionnaire,” ASIC said.

“The questions and response options were based on and relied predominantly on complex consumer attributes set out in the Fund’s TMD. The TMD is not intended to be a consumer-facing document and there was a high risk that retail clients would not understand the questionnaire. This may lead to inaccurate responses and distribution of interests in the Fund by Australian Unity to retail clients outside the target market.

ASIC was also concerned the questionnaire’s effectiveness was undermined by:

• giving prompts disclosing which response option places the retail client outside the target market; and
• having follow up telephone communications to provide retail clients with a further opportunity to amend their response to fit within the target market.

The interim order stops Australian Unity and other distributors from dealing in interests in giving a product disclosure statement for or providing general advice to retail clients recommending an investment in the Fund. The order is valid for 21 days unless revoked earlier.