ASIC Commences Legal Action Against Australian Unity Funds Management

Australia’s corporate regulator has launched legal action against Australian Unity Funds Management. The company is being accused of offering investment products to retail investors without properly checking whether they are suitable.

The Australian Securities and Investments Commission (ASIC) filed documents in the Federal Court in Melbourne. It claimed that Australian Unity breached design and distribution laws by failing to assess investor questionnaires over a lengthy period, while still marketing its Select Income Fund.

ASIC Targets Australian Unity’s Screening Failures In Select Income Fund Distribution

In its filings, ASIC is calling for the court to impose financial penalties and public disclosure requirements on the fund manager. Australian Unity Funds Management operates under the broader Australian Unity group, which recently reported strong revenue results, highlighting its significant presence in the market.

The case centers around handling the Select Income Fund, a mortgage investment scheme that pools investor money and lends it out as first mortgages on property development projects. The fund was expected to admit only those investors who matched a specific profile, as outlined in its target market determinations. This was meant to ensure the product was only sold to those it was intended for.

ASIC says that to support this process, Australian Unity has developed questionnaires asking prospective investors about their financial goals, risk tolerance, and investment timeframes. These surveys were designed to determine whether an applicant fell within the fund’s intended target market—individuals looking for income and willing to take on moderate to high investment risk.

ASIC Aims To Address Major Compliance Gaps As Unscreened Investors Enter Fund

Despite having this system in place, ASIC alleges that Australian Unity failed to review these questionnaire responses for nearly two years. During this period, more than 300 retail investors submitted applications to the fund. Of these, over 200 completed the questionnaires, and up to 144 gave answers suggesting they did not meet the fund’s target market criteria.

The matter got worse when court papers showed that 87 people were let into the fund without filling out any questionnaire at all, especially in the early part of the time being looked at. ASIC said this was a big problem and showed poor checking by the company.

Commenting on the matter, ASIC Deputy Chair Sarah Court said the rules were there to help make sure people get financial products that fit their goals, personal situations, and needs. She said just giving a questionnaire isn’t enough—companies have to actually read and check what people say in them.

This court case comes after ASIC recently warned that many fund managers aren’t doing a good job following the rules. The watchdog said a lot of them, who handle close to a trillion dollars, don’t have good systems to check how things are being run.