ASIC has made interim stop orders against the 12 Month Term Account and 2 Year Account products offered under the La Trobe Australian Credit Fund (Fund), a registered managed investment scheme operated by La Trobe Financial Asset Management Limited (La Trobe) due to deficiencies in the target market determination (TMD) for both products.
ASIC is concerned that target market for La Trobe's 12 Month Term Account and 2 Year Account products:
- suggest an inappropriate level of portfolio allocation given the risks of the Fund, and
- do not include appropriate distribution conditions.
ASIC is taking this action to protect consumers and retail investors from acquiring products that may not be suitable for their financial objectives, situation or needs.
The interim orders prevent La Trobe from dealing in interests giving a product disclosure statement for, or providing general financial product advice to, retail clients recommending an investment in the 12 Month Term Account and 2 Year Account products. The orders are valid for 21 days unless revoked earlier.
This stop order referral arose from ASIC's retail private credit surveillance which focused on fund transparency, governance, valuation practices, management of conflicts of interest and fair treatment of investors, conducted as part of its response to Australia's evolving capital markets.
Background
The Fund provides investment offers in seven investment accounts with different investment terms, yield and characteristics. The 12 Month Term Account and 2 Year Account are invested almost entirely in loans secured by registered first mortgages, with the exception of small cash and term deposit holdings held to meet cash requirements. These products are not bank deposits. The rates of return are not guaranteed and are determined by future revenue of the pool of assets that comprise the account, the investment may also not generate the expected income returns and there are conditions around withdrawals. According to page 3 of the PDS the Fund had $11,605 million in assets under management at 30 September 2024.
On its website La Trobe promotes itself as one of Australia's premier alternative asset managers with $20 billion in assets under management and over 120,000 investors.
Under the design and distribution obligations (DDO), financial product issuers and distributors must ensure the product's TMD is clear and appropriately defines the target market, accurately reflects the product's risks and features and includes appropriate distribution conditions.
To date, ASIC has issued 91 interim stop orders and one final stop order under DDO since the inception of the regime.
Where firms are not doing the right thing, ASIC can take quick action under DDO to disrupt poor conduct and prevent potential consumer harm.
