Yesterday ASIC released two reports relating to ‘capital protected’ and ‘capital guaranteed’ investment products:

  • a report that ASIC describes as a ‘health check’ on the capital protected and capital guaranteed products market (Report 340)1; and
  • a research report into retail investors’ understanding of those products (Report 341)2.

These reports update and supplement Report 201 which was issued almost three years ago and which we reported on in our article ‘ASIC releases report on structured products disclosure’.3

These reports echo, and are a timely reminder of, a number of the themes from Report 201 and confirm that capital protected and capital guaranteed structured products remain on ASIC’s radar. Structured product issuers and advisers should familiarise themselves with these reports, and revisit their use of ‘protected’ or ‘guaranteed’ labels, particularly where the protection or guarantee is subject to conditions.

What was ASIC’s ‘health check’?

ASIC usually describes its activities as ‘enforcement actions’, ‘surveillances’ and the like, so some might wonder what a ‘health check’ is. To explain this terminology, ASIC describes its project as involving:

  • a market review;
  • risk identification;
  • qualitative investor research;
  • reviewing a sample of retail investor complaints; and
  • ‘identifying current practices in the labelling, description and promotion of, retail structured products.

What are the key issues identified in the health check?

The key findings from the ‘health check’ are that ASIC believes:

Click here to view table.

ASIC’s next steps

In a change of approach from Report 201, ASIC’s next steps from the ‘health check’ are:

  • finalising its review of a sample of advice files
  • further enforcement action and surveillances, individual feedback to licensees, and a public report about ASIC’s advice review findings
  • contacting product issuers and distributors about its concerns in relation to advertising and promotion.

These reports, and ASIC’s next steps, confirm that ASIC is maintaining its regulatory interest in capital protected structured products.