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Are you on ASIC's radar?

ASIC has been busy in its surveillance of retail and wholesale schemes, issuing stop orders on 11 target market determinations (TMDs) and a PDS and requiring the marketing materials for 18 funds (nine retail and nine wholesale funds) to be amended. Partner Sean McMahon highlights the key takeaways from ASIC’s surveillance on both advertising materials and disclosure documents.


  1. Include prominent warnings when advertising past and target returns and footnote that past performance is not indicative of future performance and may not be achieved.
  2. Use appropriate comparisons for the investment strategy of the fund and include prominent warnings about the comparison. Traditional indices, such as the RBA cash rate, have been scrutinised by ASIC when used as a comparison to products which have a non-comparable risk profile without appropriate warnings, including funds investing in real estate mortgage-backed securities and asset backed securities. 
  3. Update the performance statistics in advertising and offer documents frequently.
  4. Give balanced messages about returns and the risks of the investment. Where the returns of the product are promoted, include a reference to the risks section of the PDS. 

And always remember—if it’s good enough to include in an ad, then it’s good enough to be in the offer document.

TMDs—lessons for issuers

For TMDs, the number and frequency of stop orders (11 since 13 September 2022), relating to a range of products demonstrates they are squarely in ASIC’s sights, and there are important lessons for issuers to consider when reviewing or issuing a TMD. 

Generally, having non-specific or no distribution conditions in the TMD is considered by ASIC to not meet the appropriateness requirements under the design and distribution obligations, consistent with the purpose of the regime. Distribution obligations are those in respect of how and through what channels products are marketed.  ASIC is also heavily focussed on TMDs which set the reasonable allocation of funds to a product inconsistent with the standard FSC wording comprised in the ‘Investment products and diversification’ section of the TMD. For example, expressing the product as potentially a solution or standalone (75 percent – 100 percent) component will put the TMD at risk of being on ASIC’s radar.  

Several issuers were found to overstate the capital preservation of the products in the TMDs. As a rule of thumb, if there is any risk an investor may lose their capital when investing in a product, the capital preservation traffic light should not be more than amber and the capital guaranteed traffic light should be red.  The product’s liquidity needs to be considered carefully and the ability to withdraw funds should not be overstated. If the underlying product is illiquid, ASIC has scrutinised TMDs which scope the target market as including investors needing liquidity in the short term. Likewise, for the risk and return profile, if the product involves borrowing in its activities a low risk and return profile should not be promoted. 

Is your TMD compliant?

If you are unsure whether your TMD is compliant or it needs to be reviewed, please reach out to a member of our Funds Management team.


Sean McMahon

Sean McMahon

Managing Partner

Contact McMahon Clarke

T +61 7 3239 2900
A Level 7, 100 Creek Street, Brisbane Qld 4000