ASIC cracks down with fourth private credit interim stop order
A fourth private credit fund has received interim stop orders from ASIC following the regulator’s surveillance.
Two share classes for the TruePillars Investment Fund, a registered managed fund run by TPRE, have received interim stop orders on their product disclosure statements.
The $14.6 million fund invests in notes issued by a related party, which provides credit for a wide range of purposes, including equipment financing, rideshare financing, business and trail book loans, mezzanine loans (second mortgage), vehicles, agricultural equipment, and lends on a secured and unsecured basis.
The interim orders stop TPRE from offering, issuing, selling, or transferring interests in the Pooled Unit and Loan Units of the Fund.
ASIC said it made the interim orders to protect retail investors from acquiring products under PDSs that may be defective and not worded and presented in a clear, concise, and effective manner. If ASIC’s concerns are not addressed promptly, the regulator may consider final orders instead, although TPRE will have the opportunity to make submission first.
The corporate regulator said it is concerned that the PDSs for the fund may:
- Omit information about the investments and terms of the investments of the Fund.
- Not adequately disclose the types of conflicts of interest that may be expected to occur and how these are managed.
- Fail to adequately disclose significant risks associated with an investment in the Fund including liquidity, withdrawals and valuation.
- Fail to adequately disclose the fees and costs of the Fund.
- Contain misleading statements about income distributions, loss reserves, liquidity, risk, and withdrawals.
ASIC’s surveillance of private credit funds is seeking to understand how retail investors are accessing the funds, how transparency of the vehicles can be improved, their fund governance, valuation practices, and management of conflicts of interest.
This is the fourth fund affected by interim stop orders following orders by ASIC against La Trobe Financial and RELI Capital last month.
The La Trobe order was imposed on 18 September by ASIC after concerns that the target market determination (TMD) for the 12-Month Term Account and 2-Year Account products suggested an inappropriate level of portfolio allocation given the risks of the fund and did not include appropriate distribution conditions. Orders have since been lifted on the Australian Credit Fund.
Meanwhile, on the RELI Capital Mortgage Fund, the target market potentially included investors who intended to hold the fund as a ‘Core Component’ (25–75 per cent) of their portfolio, the fund’s risk level ‘Risk level 3 (Low to Medium)’ is an incomplete measure of the fund’s risk, the TMD states that the Fund is suitable for investors seeking capital preservation, and the TMD specifies that no distribution conditions are necessary for the fund.
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