Fund Regulatory Update

AFSL Group has AFSL cancelled

The Australian Securities and Investments Commission (ASIC) has cancelled the Australian financial services licence of AFSL Group Pty Ltd, as of 2 December 2022.

ASIC found that AFSL Group did not lodge its financial statements and audit reports for two financial years and did not maintain membership of the Australian Financial Complaints Authority (AFCA) scheme. AFSL Group has applied to have its AFCA membership reinstated.

Quantum Funds Management AFSL suspended

Due to a lack of required professional indemnity insurance, Quantum Funds Management Limited has had its AFS licence suspended.

Quantum is the responsible entity for several registered managed investment schemes, and may provide financial services that are necessary to winding up the schemes, except the Quantum Strata Scheme No. 14, which is not being wound up. Peter Gribble, a director at Quantum, has been banned for three years.

ASIC takes civil action against American Express over DDO obligations with David Jones credit cards

ASIC has taken American Express Australia (Amex) to Federal Court alleging breaches of design and distribution obligations, a first for ASIC. The case is in regards to two Amex credit cards co-branded with David Jones, whereby Amex needed to make target market determinations (TMDs) in terms of who the cards were designed to be marketed to and how they would be distributed.

ASIC alleges that the TMDs issued by Amex did not limit distribution to people looking to spend on a credit card that earned points or other benefits. ASIC also alleges that Amex was aware that cancellation rates were high for applications for the credit cards in David Jones stores, and much higher than when applications for credit cards were made online.

ASIC also alleges that Amex knew some consumers were confused regarding whether they had applied for a loyalty card or a credit card, and thus the TMDs were not appropriate and required review - which ASIC says Amex did not do until 5 July 2022.

Vanguard receives infringement notices from ASIC over greenwashing

Vanguard Investments has received three infringement notices from ASIC regarding allegations of greenwashing inside a product disclosure statement for the Vanguard International Shares Select Exclusions Index Funds. ASIC alleges the document may have been liable to mislead consumers by overstating its tobacco sales exclusion.

The exclusion claimed to prevent investment in companies involved in significant tobacco sales, and did exclude some tobacco investments, however, did not exclude companies involved in the sale of tobacco products. Vanguard paid $39,960 in infringements.

Australian Fiduciaries has interim stop orders put on three funds

Australian Fiduciaries Limited has had interim stop orders placed on three funds by ASIC preventing the company from offering or distributing the funds to retail investors due to issues with the target market determinations. The stop orders are in place for 21 days. The funds are:

• Global SRI Ethical Alpha Fund

• Global SRI All Seasons Fund

• Global SRI Multi-Strategy Fund

APS Savings interim stop order in place

ASIC has placed an interim stop order on APS Savings Limited due to deficiencies in its TMD. APS Savings prevents APS Savings from issuing interests in, providing a prospectus for or providing financial advice to retail clients under the existing TMD. The stop order is valid for 21 days.

YFYS faith-based super funds performance test leniency removed

In late 2021, faith-based funds had a promise of their performance tests, if failed, to be assessed against a supplementary performance test using alternative indices under Your Future, Your Super rules. This exemption to the usual performance tests has been cancelled, and now all superannuation funds must adhere to the same standards.

Crescent Wealth breaches regulatory standards with misrepresented indirect costs

The trustee of Crescent Wealth Superannuation, Equity Trustees, reviewed calculations by the superannuation fund, finding that indirect costs were not calculated or disclosed correctly, which is a breach of regulatory standards. Equity Trustees said the indirect cost ratio disclosed was incorrect and too low, with total fees and costs shown in member annual statements incorrect.

Interim stop orders on two Perpetual funds

Two retail funds have had interim stop orders placed on them by ASIC after their TMDs were found lacking. The Perpetual Pure Microcap Fund and Perpetual Geared Australian Share Fund are blocked from being offered or distributed to retail investors. The stop orders are valid for 21 days.