ASIC hits La Trobe Financial with stop orders over regulatory concerns

Financial giant La Trobe had four investment products representing $11.8bn frozen after the watchdog identified 'unsuitable' risks, meaning they cannot accept new money.

ASIC chair Joe Longo this week. Jane Dempster/The Australian.

The corporate regulator has slapped Melbourne private lender La Trobe Financial with freezing orders across investment funds representing more than $11.8bn in client money.

The regulatory speedbump could hobble the company’s chances of finding a buyer amid a live sale process.

The Australian Securities and Investments Commission hit La Trobe Financial with the orders late on Thursday because it held concerns over the risks attached to products being marketed to investors.

This prevents it from raising money or recommending the products for 21 days.

ASIC zeroed in on La Trobe Financial’s Australian credit fund, as well as its US Private Credit Fund; and separately La Trobe Financial’s 12 month Term Account and 2 Year Account products, finding issues in Target Market Determinations published.

Target Market Determinations are key disclosures required by law of investment products, describing who a product is for and what it does.

But ASIC said La Trobe Financial’s disclosures suggest they may not be suitable for retail investors.

ASIC made the orders after surveillance of the private credit sector. “ASIC is taking this action to protect consumers and retail investors from acquiring products that may not be suitable for their financial objectives, situation or needs,” it said in a statement.

La Trobe Financial has nearly $20bn in assets, with more than 120,000 investors attracted by its higher yielding offerings.

La Trobe Financial, which was contacted for comment, is a key player in the private credit market. The lender is currently being shopped around under a deal that could value it in excess of $2.5bn.

Canadian pension manager Brookfield has short-listed at least three parties, with bids expected by Friday.

ASIC is taking a closer interest in private markets, where it has identified concerns around opacity of invest­ments, conflicts of interest, valuation uncertainties, illiquidity and leverage, as well as the growing participation by retail investors in the realm.

Originally published as ASIC hits La Trobe Financial with stop orders over regulatory concerns