SSB caught up in ASIC disclosure crackdown
Leading investment house Salomon Smith Barney (SSB) has found itself caught up in theAustralian Securities and Investment Commission’s(ASIC) ongoing crackdown on disclosure documents for financial services products.
The crackdown related to an SSB product designed to allow investors to take up interests in funds which invested in Asian and Australian securities.
The SSB product advertised a fixed minimum rate of return and the possibility of a variable amount of return over and above the minimum, with the variable amount being partly at the discretion of the issuer.
ASIC says it held concerns that the issuer’s right to vary the terms of the offer were not fully explained and because the extent of the issuer’s right to set that portion of the return which was not fixed was not explained.
Also caught up in the ASIC crack-down was UK company, the CMC Group, and Queensland Olives Management.
CMC Group found itself confronted by an interim stop order with respect to a product which permitted investors to take a position on shares, indices, gold and silver, foreign exchange contracts and currency options and subsequently issued a supplementary PDS.
Queensland Olives Management was subjected to the stop order because the responsible entity had not lodged its financial statements for the year ended June 30, last year.
ASIC’s director of financial services regulation, Sean Hughes, says the increased complexity of futures and derivatives products meant ASIC had to ensure that investors were properly and adequately informed about all the important features of a product, including the tax position, investment risk and important terms which give the issuer a wide discretion.
“Issuers must fully explain all costs, any examples used to illustrate the product should show a loss situation as well as a profit one, and examples should show the full workings of the product including deposits and margin calls,” he says.
Recommended for you
The month of April enjoyed four back-to-back weeks of growth in financial adviser numbers, with this past week seeing a net rise of five.
ASIC has permanently banned a former Perth adviser after he made “materially misleading” statements to induce investors.
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With the election taking place on Saturday (3 May), Adviser Ratings examines how the two major parties could shape the advice industry in the future.
