19. July 2011 10:07
ASIC recently imposed licence conditions on JB Global Pty Ltd (JB Global) following concerns it had with the advice they provided on a number of capital protected products and structured products generally.
ASIC also obtained corrective disclosure from JBG Structured Investments Pty Limited (JBG Structured Investments) in relation to the JB Global Income & Equity Accelerator Units Series 12, 14 and 15 Product Disclosure Statement dated 29 November 2010 (the PDS). JB Global was the lead adviser in the PDS.
The actions against JB Global and JBG Structured Investments come as ASIC continues to focus on ensuring investors are confident and informed, and structured product issuers and advisers are accurate in their advice, disclosure and marketing of complex products.
ASIC Chairman, Greg Medcraft, said: ‘Investors must be able to confidently rely on the accuracy and appropriateness of information provided by product issuers and advisers.’
‘Where this doesn’t occur, ASIC will focus their resources and act appropriately, holding these important gatekeepers to account,’ he said.
In a review of JB Global’s advice on complex structured financial products, ASIC identified cases of inappropriate advice, failure to adequately investigate clients’ situations and inadequate consideration of the characteristics and risks of the structured products. ASIC also found instances of inadequate disclosure of adviser remuneration.
ASIC was concerned that marketing material distributed by JB Global for the Series 15 Units of the JB Global Income & Equity Accelerator Units may have been misleading, by accentuating the potential benefits of the investment without balancing those benefits against the risks.
The marketing material also claimed that the Series 15 Units provided investors with tax deductible interest expense. However, this claim was not substantiated in the PDS which encouraged potential investors to seek their own independent advice as to the deductibility of interest and borrowing expenses. JB Global corrected these statements through communications to all affected parties.
ASIC was concerned that the PDS issued by JBG Structured Investments did not adequately disclose the structure of the investment, the notional nature of the compulsory limited recourse loans provided by the company to investors who acquired the Units and the reasons for the low interest rate (5.25 per cent per annum) of those loans.
JBG Structured Investments issued a supplementary product disclosure statement dated 24 December 2010 addressing those concerns after ASIC made an interim stop order on 16 December 2010 on the original PDS.
JB Global has agreed to implement the following steps under its new licence conditions:
· a review of 100 personal advice files provided on structured products during 2009 and 2010 by an independent firm;
· an offer of remediation for any clients who may have received inappropriate advice;
· a further offer for certain additional, identified clients to have their advice reviewed by the independent firm to ensure it was appropriate; and
· the appointment of a legal firm to monitor certain advertising and marketing material to ensure that it is not potentially deceptive or misleading.
Following the ASIC review and the acceptance of licence conditions, JB Global indicated its intention to change to a general advice model. JB Global has also implemented training programs and other systems and procedures to address compliance risks which may have contributed to the issues relating to the advice and marketing materials.
ASIC acknowledges JB Global’s and JBG Structured Investments’ cooperative and constructive approach in their timely response to ASIC’s concerns
ASIC will issue a health check report later in the year on capital protected structured products.