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Australian Unity lashed by ASIC over TMD questionnaire

Australian Unity Funds Management has been told to stop offering its Select Income Fund, with ASIC saying retail clients are unlikely to understand the questionnaire used to determine whether they would be in the target market.

ASIC made an interim stop order preventing the fund manager from issuing or distributing interests in the Australian Unity Select Income Fund to retail clients, saying Australian Unity had failed to take "reasonable steps likely to result in distribution conduct being consistent with its target market determination (TMD)."

The Australian Unity Select Income Fund is a contributory mortgage fund whereby clients select and invest in a suite of syndicate-funds which each then provide exposure to a specific registered first mortgage loan for property developments.

ASIC said Australian Unity relied on a flawed questionnaire as a key step for compliance with its obligations when dealing with retail clients who have not received financial advice.

"The questions and response options were based on and relied predominantly on complex consumer attributes set out in the fund's TMD. The TMD is not intended to be a consumer-facing document and there was a high risk that retail clients would not understand the questionnaire," ASIC said.

"This may lead to inaccurate responses and distribution of interests in the fund by Australian Unity to retail clients outside the target market."

ASIC added that the questionnaire's efficacy was also undermined by the fact it gave prompts to retail clients about which responses would place them outside of the fund's target market, and that Australian Unity also followed up with telephone communications to provide clients a further opportunity to change their responses to fit into the target market.

Under the orders, Australian Unity and other distributors of the fund cannot provide product disclosure statements for or provide general advice to retail clients about the fund for 21 days, unless the orders are revoked prior.

Read more: ASICAustralian Unity Funds ManagementAustralian Unity Select Income Fund