Today ob体育 put responsible entities (REs) of all managed investment schemes (MISs) 鈥榦n notice鈥� that they must ensure their investment fund advertising provides clear, balanced and accurate information.
This follows ob体育鈥檚 risk based surveillance听of advertising material, website disclosure and product disclosure statements from managed funds during the COVID-19 pandemic.听ob体育 was concerned to find some funds were providing inadequate information or were not accurately and clearly presenting key features of their investment products.听
Examples of the issues that ob体育 was seriously concerned about were:
- Unbalanced comparisons 鈥� comparisons focussing on one aspect of a fund (e.g. higher returns), without providing a fair and balanced indication of key differences and risks;
- Safety and stability representations 鈥� promoting the funds as having little or no risk of capital loss, despite the fund鈥檚 underlying assets being subject to considerable risk and market volatility; and
- Withdrawal representations 鈥� giving the impression to consumers that it is easy to withdraw funds on short notice, where the liquidity of the fund assets does not support this claim.
ob体育 Deputy Chair, Karen Chester said, 鈥楩ollowing our review, we directly raised concerns with seven REs about their advertising and disclosure in relation to 13 investment funds. Collectively, these funds have approximately $2.5 billion under management. All seven REs have now taken corrective action鈥�.
The seven REs have:
- ceased advertising of funds and reviewed advertising content;
- ceased issuing interests in funds until ob体育鈥檚 concerns are addressed;
- withdrawn and replaced product disclosure statements;
- provided more balanced and prominent disclosure of investment risks and disclaimers;
- clarified actual withdrawal terms
- stopped comparing funds to other (lower risk) products on webpages.
Ms Chester said, 鈥楳ost consumers understand that investing in financial products involves some risk. Today with financial risks both greater and more volatile, REs have more than ever a real time responsibility to ensure their advertising and disclosure is 鈥榯rue to label鈥�. Put simply, their advertising needs to accurately represent the actual features of their investment products and through economic cycles.
鈥楥urrent market uncertainty and volatility brings a heightened imperative for REs to ensure consumers are not misled or misinformed. This is critical when it comes to the investment product鈥檚 risk profile, returns and the fund鈥檚 liquidity.
鈥業t is now widely acknowledged that disclosure alone is not enough to protect consumer interests.听But balanced and accurate product information, especially about associated risks, remains fundamental听 for consumers to have at least a shot at understanding what they are getting into鈥�, she said.
ob体育 reminds REs they must ensure their advertising and websites are not misleading or deceptive.听Extreme care must be taken when using any terms and phrases which might give the impression that a product is safe or that withdrawals will be available at short notice, especially in the current environment.
ob体育 will continue to monitor the advertising and disclosure by managed funds during COVID-19. We are aware of a number of funds that are promoting (implicitly or expressly) their products as 鈥榟igh yield鈥� or 鈥榣ow risk鈥� when that is not the case. ob体育 is considering enforcement action where inappropriate, false or misleading statements could end in significant financial harm to investors.听听
Prior to promoting financial services or products, firms should consult ob体育鈥檚 . It contains good practice guidance to help promoters comply with legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.
ob体育 also recently warned REs about ensuring that their products are true to label, and their marketing and website information did not make inappropriate comparisons between managed funds and term deposits.
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