How Fund Managers Market

Fund marketing relies on promotion, and it is a standard industry practice — except when it’s not. 

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It’s imperative that fund managers balance the narratives they use to engage retail clients with strict regulatory compliance to: 

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• Protect investors from misleading claims, and
• Ensure their product disclosures are fully transparent. 

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Here’s a look at how fund managers market, and where and why they must exercise caution. 

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How Fund Managers Market

It’s not uncommon for fund managers to raise capital by cross-selling to current retail clients. This is a normal process and harmless when done transparently. 

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However, compliance challenges can arise when a fund manager:

• Engages in persuasive tactics to deemphasise inconsistent or poor performance. 
• Exaggerates certain performance benchmarks that fail to tell the whole story.
• Use selective time periods when describing performance.
• Is anything but fully transparent about the impact of fees on investment returns.

For fund managers and investors alike, funds marketing must be navigated carefully and strictly per AFSL authorisations, consumer protections laws and anti-hawking laws to ensure it remains legal.

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Legal Issues To Monitor

There are strictly enforced anti-hawking laws that prohibit fund managers from contacting retail clients to sell unsolicited financial products. Managers must hold proper AFSL authorisations that allow them to market to retail clients and comply with these anti-hawking laws. 

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They must also:

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• Carefully navigate Spam Act electronic marketing consents.
• Ensure retail clients receive mandatory documents, like a Product Disclosure Statement (PDS).
• Make sure that a target market determination (TMD) is made available for the fund.

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ASIC’s Regulatory Updates

ASIC is updating Regulatory Guide 234 on advertising financial products, which absorbs past-performance guidance (RG 53). RG 234 will clarify enforcement standards, reflect recent regulatory actions and provide more meaningful guidance reflecting our digital age.

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Fund managers are advised to keep watch on these changes and ensure they’re drawing within the regulatory lines to avoid regulatory action.

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Recent ASIC Enforcements To Learn From

Regulators actively penalise deceptive funds marketing, as we’ve recently seen. In addition to greenwashing disclosures and the current focus on private credit funds, ASIC’s use of infringement notices and fines, as well as interim stop orders in respect to PDSs and TMDs, is on the rise.

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ASIC uses regtech to find and analyse digital materials that fall short of regulatory standards and can move swiftly to shut them down.

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The Bottom Line: Data Over Distraction

When marketing funds, retail investors and financial advisers should prioritise the data over the stories behind the data. Fund managers should focus on honesty and clear, concise and effective disclosures over sales to avoid severe regulatory penalties. The use and accurate presentation of past performance information in marketing materials must be carefully examined.

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If you need to double-check your funds marketing, seek acute and actionable legal advice from PMC Legal today. 

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