Fixed term investment marketers in ASIC’s sights

8 May 2020

The marketers of fixed-term investment products have found themselves in the sights of the Australian Securities and Investments Commission (ASIC) with the regulator warning consumers that such offerings are not necessarily comparable with bank term deposits. 

ASIC said it was monitoring advertising around the products and flagged the likelihood of action against the promoters. 

It pointed to what it described as “a surge” in the marketing of fixed-term investment products in recent months. 

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“ASIC is monitoring such advertising and the entities involved because of reports about fixed-income products being advertised as term deposit ‘alternatives’ or ‘substitutes’, and consumers investing significant sums as a result,” the regulator said. 

“ASIC views these investment products as riskier than term deposits because they may be issued by entities that are not well-capitalised, not protected by the Government’s Financial Claims Scheme, and not supervised by the Australian Prudential Regulation Authority (APRA). Some are also backed by concentrated portfolios of higher risk unlisted and illiquid assets,” it said. 

“ASIC recognises that many consumers may be seeking higher and regular returns on their investments during this time because of low interest rates and market volatility. But there are significant differences between bank term deposits that are relatively low-risk products and fixed-term funds and debentures offering regular, fixed distributions that are higher risk investment products.” 

ASIC noted that bank term deposits were considered relatively low-risk because they  were protected by the Government’s Financial Claims Scheme, also known as the Government guarantee, which guarantees the first $250,000 invested (per depositor, per bank) and the ability of banks to honour their commitments to depositors was actively supervised and monitored by APRA. 

Commenting on the regulator’s approach, ASIC deputy chair Karen Chester said, “If an investment product offers higher returns than a term deposit, it is more likely than not to be higher risk. In the current uncertain and volatile markets, higher risk investment products are, more than ever, not for everyone. Especially for smaller investors, be they retail or wholesale, when they are not investing as part of a diversified portfolio”. 

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