ASIC takes action against Aus Unity over DDO failures
Australian Unity has been targeted by ASIC for allegedly failing to take reasonable steps to ensure retail investors were in the target market for one of its investment products.
The corporate regulator said on 11 June that it has commenced court action against Australian Unity Funds Management Limited, alleging it acted unlawfully by failing to take reasonable steps to ensure retail investors were in the target market for one of its investment products.
ASIC alleged that Australian Unity, the responsible entity of the Select Income Fund, made three Target Market Determinations between 5 October 2021 and 5 October 2023 identifying the class of suitable investors for the fund. But, according to ASIC, the firm failed to take reasonable steps to ensure retail investors who invested in the fund were in the target market.
During the relevant period, Australian Unity gave prospective investors a questionnaire to determine whether a potential ‘non-advised’ investor was within the fund’s defined target market.
However, the corporate regulator said for much of the period, the questionnaire was given only to online applicants, with paper applicants included from September 2022. Moreover, it alleged the answers weren’t reviewed until August 2023 and weren’t used to screen investors until 6 October 2023, despite ongoing fund issuances.
ASIC deputy chair Sarah Court 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.
“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.”
Court added that in this case, ASIC believes 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.
“Product issuers must take reasonable steps to ensure that investors are within the target market before they issue interests in a product,” Court said.
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