A recent Federal Court decision has broad implications for advertising across the financial services industry, particularly the frequent use of disclaimers to convey finer product details or terms such as ‘stable’ to describe funds holding asset classes other than fixed interest investments and cash. Litigation partner Selina Nutley explains.
On 26 November 2021, the Federal Court handed down its decision in ASIC’s proceedings against La Trobe Financial. La Trobe admitted to making misleading representations in its advertising when it said investors in its 48 Hour Fund and 90 Day Fund had the right to withdraw funds within the times referenced in the fund titles, when this wasn’t supported by the funds’ constitutions. While its marketing contained disclaimers, La Trobe admitted these disclaimers were not placed prominently enough to avoid investors being misled. La Trobe also admitted, in describing those same products as ‘stable’, investors could have been misled to believe there was no substantial risk their capital could be eroded, when this was not the case as the products were primarily mortgage funds.
The proceedings came against a backdrop of earlier communications spanning several years between ASIC and La Trobe, at the conclusion of which ASIC indicated it held no further concerns with La Trobe’s advertising. La Trobe was ordered to pay a penalty of $750,000 (based on a maximum $15 million penalty). While the Judge viewed this as an extremely modest penalty, he was satisfied it was appropriate in all the circumstances, given La Trobe otherwise had a good compliance culture, had made appropriate admissions in the proceedings, and particularly because it had previously made amendments to its advertising which it understood resolved all of ASIC’s concerns.
We have followed this closely given the ramifications for the industry. Contact us for help understanding the impact of this decision on fund marketing.