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ASIC hits Spaceship Super with stop order over marketing violations
The Australian Securities and Investment Commission has issued its first interim stop order on a superannuation product for running afoul of design and distribution obligations (DDOs), hitting Spaceship Capital over deficiencies in its marketing of Spaceship Super as well as three managed funds.
Spaceship Super is a sub-plan of the Tidswell Master Superannuation Plan, issued by Diversa Trustees. The stop orders also apply to three managed funds Spaceship Capital promoted as the responsible entity: the Spaceship Earth, Spaceship Origin and Spaceship Universe portfolios.
The order bars 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 the funds. It seeks to protect consumers and retail investors from acquiring products not suited to their financial objectives or needs.
Spaceship Super had 18,000 members and about $550 million in assets under management as of June 30, 2022. The three Spaceship portfolio funds had more than $450 million in combined AUM.
ASIC found the target market in the TMD for Spaceship Super was defined too broadly and did not properly take into account the risks of the product options. “The target returns for the investment options were too low to be consistent with investors in the target market, who were identified as seeking high returns.”
It also cited a “mismatch between the investment risk profile of the investment options (very high) and the return profile identified for investors within the target market (high)” and “insufficient consideration of the investment risk features associated with the investment options”, including concentration, market and currency risks.
“Furthermore, ASIC considered that the distribution conditions in the TMD were not appropriate to ensure that Spaceship Super would likely be distributed to consumers in the target market,” it added.
The target markets were likewise defined too broadly for the Spaceship funds, with inconsistent information across the TMDs for the funds and similar risk profile mismatches.
ASIC served the orders on Diversa and Spaceship Capital on May 31, and they are valid for 21 days, although the agency said it will consider making final orders if the concerns are not sufficiently addressed.
“Spaceship is taking immediate steps to address ASIC’s concerns and is committed to working proactively to address the issue,” Spaceship Capital said in a statement explaining that it has temporarily closed the three portfolio funds to new investments. It said it has also temporarily suspended distribution of Spaceship Super.
In a May 3 update on its compliance review around the DDO regime, which requires issuers and distributors of financial products to ensure such products are “designed with consumer needs in mind and distributed in a targeted manner”, ASIC said financial product issuers needed to “lift their game” after finding “across the board” deficiencies in marketing materials.
The agency, under commissioner Danielle Press (pictured) has so far issued 40 interim stop orders over DDO failures; of those, 33 have been lifted after the issuers addressed ASIC’s concerns or withdrew the noncompliant products.
