The Australian Securities and Investments Commission (ASIC) has issued a temporary cease-and-desist order prohibiting Australian Unity Funds Management Ltd from issuing or distributing interests in the Australian Unity Select Income Fund to retail clients.。

ASIC's action was motivated by concerns that Australia United was failing to take reasonable steps to ensure that its distribution practices met the requirements of Target Market Determination (TMD).。

ASIC's concerns are related to Australia's reliance on a significantly flawed retail customer questionnaire as a key compliance step。Retail customers who have not received financial advice when applying for a fund interest are required to answer the Australia Union questionnaire。

The question and answer options in the questionnaire are mainly based on the complex consumer attributes listed in the fund TMD。TMD is not a consumer-facing document and there is a high risk that retail customers will not understand the questionnaire。This could lead to inaccurate answers and allow Australia United to distribute fund interests to retail clients outside the target market.。

ASIC is also concerned that the validity of the questionnaire has been weakened by the following factors:

• Provide hints to reveal which answer options will place retail customers outside of the target market
• Further provide retail customers with the opportunity to modify their answers to match the target market through follow-up telephone exchanges

The temporary stop order prohibits Australian Union and other distributors from dealing with equity matters, providing product disclosure statements or providing general advice to retail customers to recommend investment funds.。The order is valid for 21 days unless it is revoked in advance.。

Under design and distribution obligations (DDOs), issuers and distributors of financial products must take reasonable steps to ensure that distribution practices related to retail customers comply with the TMD of the product。

To date, ASIC has issued 87 temporary stop orders and one final stop order under the DDO, including an order against the Australian Union.。This is the third time since the DDO took effect in October 2021 that ASIC has used its stop-and-frisk powers to respond to a financial product that breached its reasonable steps obligations.。