ASIC halts income fund offering

ASIC Westlawn fund

ASIC has placed an interim stop order on the distribution of a property fund aimed at retail investors because of deficiencies found in its target market determinations.

The Australian Securities and Investments Commission (ASIC) has issued an interim stop order preventing Westlawn Financial Services Limited from offering or distributing the Westlawn Income Fund to retail investors because of a non-compliant target market determination (TMD).

The corporate regulator stated the 21-day order prevents Westlawn from issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending investment in the fund.

ASIC stated the fund is made up of a portfolio of secured and unsecured loans, credit, leases and other fixed-interest financial assets, and is invested in five property development loans in New South Wales, but is considered high risk by the regulator.

In making the order, ASIC was concerned Westlawn had not appropriately considered these features in determining the target market for the fund.

It added that according to the TMD, the fund includes investors with a tolerance for a moderate level of risk with respect to their investment, investors who need liquidity or will need to make withdrawals during the investment term, investors seeking to have their capital invested for a minimum period of two years and those seeking regular monthly income distributions.

“ASIC also considered that the TMD did not meet the appropriateness requirements under the design and distribution obligations,” it said.

“The distribution conditions in the TMD were not specific enough to ensure the fund is distributed to consumers in the target market.”

It stated it expected Westlawn to consider the concerns raised in the TMD and take steps to ensure compliance, and a final order may be imposed if the concerns were not addressed.

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