Another fund manager hit with an ASIC DDO stop order

Mike Taylor

Managing Editor/Publisher, Financial Newswire

21 October 2022

Another fund manager has been hit with an interim stop order from the Australian Securities and Investments Commission (ASIC) because of a non-compliant target market determination. 

It is the second time in as many weeks that ASIC has made such an announcement nominating design and distribution obligation failures. 

The regulator announced that the interim stop order had been imposed on Westlaw Financial Services with respect to offering or distributing the Westlawn Income Fund to retail investors. 

The fund consists of a portfolio of secured and unsecured loans, credit, leases and other fixed-interest financial assets which ASIC said it considered to be high-risk. 

The fund is invested in five property development loans in NSW. 

ASIC said it was concerned that Westlawn had not appropriately considered these features in determining the target market for the Fund, which, according to the TMD, includes investors: 

• with a tolerance for a moderate level of risk with respect to their investment; 
• needing liquidity or needing to make withdrawals during the investment term; 
• seeking to have their capital invested for a minimum period of two years; 
• seeking regular monthly income distributions. 

“ASIC also considered that the TMD did not meet the appropriateness requirements under the design and distribution obligations (DDO). The distribution conditions in the TMD were not specific enough to ensure the Fund is distributed to consumers in the target market.” 

“ASIC expects Westlawn to consider the concerns raised about the TMD and take immediate steps to ensure compliance. If ASIC’s concerns are not addressed in a timely manner, a final stop order will be placed on the Fund. Westlawn will have an opportunity to make submissions to ASIC before the final stop order is made.”