ASIC takes La Trobe Financial to court

— 1 minute read

La Trobe Financial says it rejects assertions made by the corporate watchdog following the news it has commenced civil penalty proceedings in the Federal Court against the wealth manager, alleging that it had engaged in misleading or deceptive marketing around one of its funds.

The regulator has taken the firm to court for its capacity as the responsible entity of the La Trobe Australian Credit Fund, an unlisted registered managed investment scheme with over $5.15 billion in assets under management and more than 45,000 investors. The minimum investment is currently $10. 

The fund invests in loans secured by first mortgages over residential and commercial real estate, as well as cash, deposits and other assets. 


ASIC has alleged that La Trobe Financial marketed the fund in ways that were "misleading or deceptive, or likely to mislead or deceive", pointing to advertising in newspapers and magazines, on television and radio, and on its website.

Specifically, ASIC has argued La Trobe represented that:

• consumers who invested funds in the 48 Hour Account would be entitled to withdraw their funds within 48 hours of giving a withdrawal notice to La Trobe; and

• consumers who invested funds in the 90 Day Account would be entitled to withdraw their funds within 90 days of giving a withdrawal notice to La Trobe. 

According to ASIC's statement of claim, the fund had a number of conditions that could limit withdrawals. 

The constitution of the fund, dated 24 December 2004, set out the rights of members to withdraw. Before 3 August, members of the fund could only withdraw from the 48 Hour Account and the 90 Day Account:

• (when the fund was liquid) by giving a withdrawal notice to La Trobe, which La Trobe was required to satisfy within 12 months after receiving the notice; or

• (when the Fund was not liquid) if La Trobe made a current withdrawal offer, in which case, members had a right to withdraw a proportion in accordance with the terms of that withdrawal offer. Otherwise, a member may have no right to withdraw funds invested in either investment option.

In certain circumstances, whether the fund was liquid or not, La Trobe was entitled under the constitution to only satisfy withdrawals proportionately, according to a formula based on the amount of cash available in the fund to satisfy withdrawals, ASIC alleges.

The regulator also stated that LaTrobe represented any capital invested in its Australian Credit Fund would be "stable" in the sense there was no risk of substantial loss of capital, when in fact there was a risk of substantial loss of capital; and that an investment in the fund would provide a specified rate of return when none of the investment options in the fund were guaranteed to provide any particular rate of return.

ASIC's current definition of a "capital stable fund" on its MoneySmart website refers to "a fund that invests across a range of asset classes but with a significant portion in defensive assets such as fixed interest investments and cash and a small portion in growth assets such as shares and property". 

ASIC is seeking declarations, pecuniary penalties and corrective advertising orders against La Trobe. 

The date for the first case management hearing is yet to be scheduled by the court.

Commenting on the announcement, La Trobe said it rejected ASIC's assertions.

"La Trobe Financial firmly believes that our Credit Fund is promoted and positioned as ‘true to label’, and is committed to ensuring that we comply with both the spirit and letter of our legal and regulatory requirements," the firm said.

"La Trobe Financial also strongly supports the efforts of ASIC to ensure that Australia’s financial sector remains efficient, honest and fair. To that end, we have been responsive to ASIC’s evolving regulatory guidance in this space."

La Trobe said the assertions were based on marketing for the Credit Fund in 2017, and that it had "engaged extensively" with ASIC in relation to the issues raised at the time an "implemented a range of resolution mechanics", including wording changes that were agreed to by the regulator, InvestorDaily understands.

"The Credit Fund has a proud history of performance. Since inception in 1999, no investor has ever suffered any loss of principal in any of the Credit Fund accounts referred to in ASIC’s claim. Additionally, we have never withheld a monthly distribution and have met all redemption requests promptly and in full," the group said.


ASIC takes La Trobe Financial to court
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