This article is from the Australian Property Journal archive
AUSTRALIA’S corporate regulator has made interim stop orders preventing MPG Funds Management Limited (MPG) from offering or distributing two trusts to retail investors because of deficient target market determinations (TMDs).
The Australian Securities and Investment Commission (ASIC)’s interim orders stop MPG from issuing interests in, giving a product disclosure statement for, or providing general advice to retail clients recommending investments in the Trusts. They are the MPG Bulky Goods Retail Trust, which recently picked up a Petbarn and Fernwood Fitness complex in Logan for $11.3 million, and MPG Essential Services Property Trust.
ASIC said it made the interim orders “to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs”.
To date, ASIC has issued 15 design and distribution obligations (DDO) interim stop orders, including the interim orders for the trusts. DDO require firms to design financial products that meet the needs of consumers, and to distribute those products in a more targeted manner
ASIC said the trusts “have an investment term during which investors have no ongoing withdrawal rights and employ leverage, which increases the level of risk for investors.
“ASIC is concerned that MPG has not appropriately considered these features and risks in determining the target markets for the trusts because the TMDs include investors: with a tolerance for an undefined ‘medium risk’, wanting stable and regular income distributions; and needing liquidity or needing to make withdrawals during the investment term for the trusts,” ASIC said.
It said it also considered that the distribution conditions in the TMDs did not meet the appropriateness requirement under the DDO because these conditions were not specific enough to make it likely for the trusts to reach consumers in the target market.
ASIC also considered that the TMDs did not adequately specify the information that distributors must report for MPG to promptly identify the occurrence of a review trigger (or any event/circumstance) that would suggest that the TMDs were no longer appropriate, the period for reporting this information to MPG, and the review triggers for the TMDs.
“ASIC expects MPG to consider the concerns raised regarding the TMDs and take immediate steps to ensure compliance.” ASIC said.
