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- La Trobe Financial Asset Management is fined $750,000 after being found guilty of false and misleading marketing around its credit fund
- The Australian Securities and Investment Commission (ASIC) says La Trobe touted its Australian Credit Fund business as “stable” in newspaper, magazine and online ads
- The corporate watchdog says this wording gave the impression that investors could not lose capital if they invested in the fund
- ASIC also found that La Trobe misled consumers about the accessibility of its ’48 Hour’ and ’90 Day’ account services, with important details being left in the fine print
- On top of its $750,000 fine, La Trobe has been ordered to pay ASIC’s court costs to the tune of $120,000
La Trobe Financial Asset Management has been fined $750,000 after being found guilty of false and misleading marketing around its credit fund.
The Australian Securities and Investment Commission (ASIC) today said La Trobe touted its Australian Credit Fund business as “stable” in newspaper, magazine and online ads.
This wording, according to ASIC, was problematic because it gave consumers the impression that there could be no financial loss of capital should they invest in the fund.
“La Trobe failed to express in a sufficiently prominent manner that a person who invested in the fund could, in fact, lose substantial amounts of capital invested,” ASIC said in a statement.
ASIC found that on top of the misleading claims about the stability of the La Trobe credit fund, the firm also mislead consumers about its ’48 Hour’ and ’90 Day’ account services.
ASIC said given the nature of the branding around these accounts, investors were made to believe they could withdraw funds between 48 hours and 90 days of providing withdrawal notice.
La Trobe, however, had written in its terms and conditions that it reserved the right to take up to 12 months to satisfy a withdrawal while a fund was liquid. If the fund ceased to be liquid, investors were only entitled to withdraw if a withdrawal offer was made by La Trobe.
La Trobe defended the proceedings in court after ASIC first launched the legal action back in December last year.
According to the firm, no liquidity event had ever caused it to delay meeting redemptions — not even during the Global Financial Crisis.
Further, La Trobe said its Credit Fund arm had a “proud history of performance”.
“Since inception in 1999, no investor has ever suffered any loss of principal in any of the Credit Fund accounts referred to in ASIC’s claim,” La Trobe said.
Nevertheless, ASIC Deputy Chair Karen Chester said when consumers were considering investments, they needed to be provided with “accurate information that doesn’t mislead them”.
“ASIC was concerned that these investment products were being sold as stable and more liquid when they were not, and essential detail was being left in the fine print,” Mr Chester said.
The corporate watchdog said La Trobe’s conduct was identified through the “True to Label” initiative that was focused on firms misleading investors.
Federal Court Judge Justice O’Bryan said La Trobe’s misleading conduct was “serious” and had “very considerable potential to mislead the public”.
“Each of the representations was made over periods ranging from about one year to more than three years, in a variety of different media that were all accessible by the general public,” Justice O’Bryan said.
“Further, the misleading conduct potentially affected investment decisions involving very large sums of money.”
On top of its $750,000 fine, La Trobe was ordered to pay ASIC’s court costs to the tune of $120,000.
