The Federal Court has ordered La Trobe Financial Asset Management (La Trobe) to pay a $750,000 penalty for false and misleading marketing of the La Trobe Australian Credit Fund (the Fund).
La Trobe鈥檚 advertising in newspapers, magazines and on websites included statements that any capital invested in the Fund would be 鈥榮table鈥�. ob体育 claimed that this gave the impression there could be no loss of capital and that La Trobe failed to express in a sufficiently prominent manner that a person who invested in the Fund could, in fact, lose substantial amounts of capital invested.
The Court found that the statement that any capital invested in the Fund would be 鈥榮table鈥�, in the sense of there being no risk of substantial loss of that capital, was a false or misleading representation.
The Court also found that La Trobe made false or misleading representations that investors in its 48 Hour Account and 90 Day Account would be able to withdraw their funds between 48 hours and 90 days of providing withdrawal notice whereas:
- La Trobe had up to 12 months to satisfy a withdrawal while the Fund was liquid;
- if the Fund ceased to be liquid, investors were entitled to withdraw only when a withdrawal offer was made by La Trobe.
ob体育 Deputy Chair Karen Chester said, 鈥榃hen consumers are considering investments, they need to be provided with accurate information that doesn鈥檛 mislead them. ob体育 was concerned that these investment products were being sold as stable and more liquid when they were not, and essential detail was being left in the fine print.鈥�
ob体育鈥檚 鈥楾rue to Label鈥� initiative identified promotional material from a number of funds that could be misleading investors. ob体育 is concerned about this type of misconduct, especially when investors are seeking yield in a low interest rate economy. Advertising is misleading when products are described as having less risk, when in fact, investors could lose some or all of their investment.
鈥楾his case serves as yet another warning that ob体育 will take action where investments are marketed to consumers as safer, lower risk or more liquid when they are not鈥�, said ob体育 Deputy Chair Karen Chester.
In his decision, Justice O鈥橞ryan stated 鈥楾he misleading conduct was serious and had very considerable potential to mislead the public about the characteristics of the investment options 鈥� both as to the entitlement to withdraw funds and the risk of loss of capital invested.
Each of the representations was made over periods ranging from about one year to more than three years, in a variety of different media that were all accessible by the general public. Further, the misleading conduct potentially affected investment decisions involving very large sums of money,鈥�
La Trobe, as the responsible entity of the Fund, was ordered to pay ob体育鈥檚 costs. The Court acknowledged La Trobe鈥檚 consent to the declarations of liability and pecuniary penalty.
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Background
The Fund鈥檚 Product Disclosure Statement says that it is authorised to hold a mixture of mortgage assets, cash, notes and other assets. The Fund is an unlisted registered managed investment scheme with over $5.15 billion in Assets under Management and over 45,000 investors.
A person may acquire an interest in the Fund (and thus become a member of the Fund) by making an investment in the Fund. The minimum investment is currently $10.
ob体育 began Federal Court proceedings against La Trobe in December 2020 (20-333MR).