Play safe, investors warned
THE corporate regulator has warned retail investors frustrated by low superannuation returns to tread carefully before investing in potentially "risky" securities such as debentures and notes.
THE corporate regulator has warned retail investors frustrated by low superannuation returns to tread carefully before investing in potentially "risky" securities such as debentures and notes.The Australian Securities and Investments Commission also says it will be monitoring advertisements for such products in the months ahead, after asking five note issuers in the past 18 months to change potentially misleading ads.The regulator is worried that recent low returns flowing from super and other assets may prompt investors to chase higher-yielding securities "without understanding there's a higher risk", said ASIC deputy chairman Belinda Gibson.The warning comes five years after the collapses of debenture issuers Westpoint, Australian Capital Reserve and Fincorp, which cost 20,000 investors hundreds of millions of dollars.The unlisted debenture industry is now worth about $4.6 billion across 45 issuers, ASIC said yesterday a big drop-off from 2007, when the market had a value of about $22 billion across 92 issuers."We are saying to investors, be careful," Ms Gibson said. "We get the sense that . . . people have forgotten those lessons."ASIC also revealed plans to lift a ban on the use of the term "secured notes" to describe securities with a first-ranked charge over intangible assets, such as loans receivable.It followed complaints from the industry that banning the use of the term "secured notes" would confuse investors and force long-established issuers to reclass and sell their products as "unsecured notes".Only securities backed by tangible assets can be classed as debentures.ASIC also unveiled updated disclosure and advertising rules for note issuers, who must warn investors they may lose some or all of their money and state that the note is not a bank deposit. ASIC also renewed warnings to publishers dealing with ads for notes and debentures, saying they should be prepared to refuse to run such ads if directed to by ASIC.