A recent surveillance by the Australian Securities and Investments Commission (ASIC) found that some fund managers must do more to ensure the investment performance representations in their fund’s marketing materials are appropriate.

Thirteen responsible entities or trustees of investment funds have voluntarily amended, or arranged for the investment manager to amend, their marketing materials and/or practices across 18 funds as a result of ASIC’s ongoing surveillance into the marketing of managed fund performance and risks.

ASIC’s Deputy Chair Karen Chester said,

‘Our primary concern here is retail investors and potentially unsophisticated wholesale investors, especially retirees, making important investment decisions based on marketing that does not accurately represent fund performance. Investors are entitled to accurate information about the products they may decide to invest in. Responsible entities, trustees and investment managers must ensure that they don’t stray into ‘fair weather’ marketing.’

ASIC’s surveillance of managed funds’ marketing material identified a number of concerns, including inadequate warnings or disclaimers about past or future performance, comparing the product to lower-risk products, indices or benchmarks and the downplaying of other risks when promoting fund benefits.

‘ASIC’s surveillance into marketing of fund performance and risk is ongoing. Where we find poor conduct, we will take prompt action to protect consumers and hold responsible entities, trustees and investment managers to account. We will deploy a range of regulatory interventions, from our recent use of stop orders through to court action where warranted,’ Ms Chester said.

ASIC expects all responsible entities, trustees and investment managers to be familiar with the principles and regulatory guidance about marketing of managed funds and other financial products, including that:

• Marketing must give balanced messages about returns, features, benefits and significant risks.
• Risk disclosure needs to be clear and prominent.
• The safety, reliability or security of an investment should not be overstated.
• Comparisons with other products or benchmarks must be appropriate and reasonable.
• Any reliance on past performance must explain that it is not indicative of future performance.
• Care must be taken with the use of images, graphs and tables to ensure they are not confusing.