The corporate regulator has issued first of its kind stop orders against a superannuation product and a CFD product for deficiencies in their Target Market Determinations.
The corporate regulator has issued stop orders on three managed funds and one superannuation product promoted by Spaceship Capital.
In a media release on Friday morning, ASIC said the interim stop order regarding Spaceship Super is the first on a superannuation product under the Design and Distribution Obligations.
The stop orders, in place since 31 May 2023 apply to:
- Spaceship Super, a sub-plan of Tidswell Master Superannuation Plan, issued by Diversa Trustees; and
- Spaceship Earth Portfolio, Spaceship Origin Portfolio, and Spaceship Universe Portfolio (together, the Spaceship Voyager Funds), issued by Spaceship Capital.
The interim orders stop Spaceship Capital and Diversa from issuing interests in, giving a product disclosure statement for, or providing financial product advice to retail clients recommending an investment in Spaceship Super and the funds.
In a separate release, ASIC announced an interim stop order preventing Mitrade Global from opening trading accounts or dealing in contracts for difference (CFDs) or margin foreign exchange contracts (margin FX) to retail investors.
The regulator’s action was in response to concerns that Mitrade failed to take reasonable steps likely to result in distribution conduct being consistent with its TMD.
This action is ASIC’s first use of its stop order powers in response to a contravention of the reasonable steps obligations regarding a financial product since DDO took effect in October 2021.
ASIC was concerned that Mitrade relied on a retail investor questionnaire with significant flaws as a key step for compliance with its obligations. When applying for a trading account, Mitrade’s questionnaire gave prompts to a prospective retail investor to review any ‘unacceptable answer’ that would indicate that the investor was not likely to be in the target market for the products. Further, Mitrade allowed retail investors unlimited attempts to pass the questionnaire.
ASIC was also concerned that Mitrade’s steps to reduce the likelihood of distribution conduct being inconsistent with the TMD included inadequate assessment of whether retail investors were likely to be in the target market for the CFDs, in the questionnaire or otherwise.
ASIC considered that Mitrade’s questionnaire:
- Did not adequately enquire into the objectives and needs of retail investors to enable Mitrade to adequately assess whether the investors are likely to be in the target market described in its TMD for the complex, high-risk, leveraged CFDs and margin FX products; and
- Lacked the degree of specificity required to adequately assess whether distribution to retail investors would likely be consistent with Mitrade’s target market criteria on knowledge and experience, in relation to CFD and margin FX trading.
The interim stop orders for Mitrade and Spaceship are valid for 21 days unless revoked earlier.
ASIC has issued the orders to protect consumers and retail investors from acquiring products that may not be suitable for their financial objectives, situation, or needs.
Under DDO, an issuer and distributors of a financial product must take reasonable steps that will, or are reasonably likely to, result in distribution conduct relating to retail investors being consistent with the TMD for the product.