ASIC places interim stop orders on funds La Trobe Financial has addressed investors
About 120,000 Aussies have been frozen out of their investment funds over the watchdog’s concerns the products may not have been offered to the right type of investors.
The Australian Securities and Investments Commission (ASIC) last week placed interim stop orders on three of La Trobe Financial’s seven fund offerings, preventing them from receiving new investments.
The corporate regulator alleged deficiencies in the target market determinations of the company’s flagship 12-month term account, its two-year account, and its US Private Credit Fund.
ASIC also alleges the La Trobe Financial funds made high-risk investments in loans to property developers that were marketed to Australians as a safe product.
Laws passed in 2021 require financial companies to make sure their products are a good fit for the people they are being offered to. The impacted accounts are worth a combined $11.5billion.
The interim stop orders will remain in place for 21 days, or until ASIC’s concerns are addressed.
‘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,’ a statement read.
Around 120,000 Aussies have been frozen out of their funds over concerns the products may not have been offered to the right type of investors (stock image)
La Trobe Financial’s 12-month term and two-year accounts are invested almost entirely in loans secured by registered first mortgages, with the exception of small cash and term deposit holdings kept to meet cash requirements.
‘These products are not bank deposits,’ ASIC added.
‘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.’
The interim orders could be lifted as early as Wednesday after the Melbourne-based company agreed to tighten its target market determination, The Australian reported.
On its website, La Trobe promotes itself as one of Australia’s premier alternative asset managers with $20billion in assets under management and over 120,000 investors.
The company announced this week that it is complying with the stop order and has paused on receiving new investments.
‘The interim stop order does not relate to a view on the performance of our assets, portfolios, or product design,’ its website states.
‘Since the launch of our retail asset management offerings in 1989, none of our portfolio accounts have experienced any gating of liquidity or freezing of withdrawals.’
La Trobe Financial chief investment officer Chris Paton addressed customers in a video message this week after interim stop orders were placed on three of its fund offerings
La Trobe Financial chief investment officer Chris Paton reassured investors in a video message that their money was safe.
He said the investment products were backed by small, carefully chosen loans spread out across different types of borrowers.
‘We manage these investments cautiously to reduce risk,’ Mr Paton said.
‘These portfolios are designed to perform across the cycle and perform they have for investors for over 35 years.
‘While we work through these matters with ASIC, we will continue to manage our portfolios conservatively.
‘We will continue to pay monthly interest to investors as we always have, and we will continue to pay maturing investments on time and in full, and we have ample liquidity within our portfolios to meet these obligations.’
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Shock as 120,000 Aussies are locked out of their investments and their funds FROZEN: What you need to know