11 October 2012 6:48am
Issuers of hybrid securities will have to contend with more intense scrutiny of their advertising, marketing and disclosure by regulators. The Australian Securities and Investments Commission chairman, Greg Medcraft, said complex retail products, including hybrids, "would get more scrutiny".
Speaking at Finsia's Financial Services forum in Sydney yesterday, Medcraft said ASIC's concern is that investors are being attracted to claims of high returns, from complex products, in an environment where asset returns are low.
"Our concern is that these products are being mis-sold," he said.
"We are looking at the appropriateness of advice, especially in marketing to self-managed superannuation funds. What we are doing is focusing on the gatekeepers – the marketing, advertising and disclosure.
"Our focus is on synthetic exchange traded funds, capital notes [hybrids] and guaranteed products.
Banks have been big issuers of hybrids over the past 12 months and retail investors have been keen to snap up the high-yielding securities.
ASIC has expressed concern about hybrids several times this year. In August, ASIC commissioner John Price said it was not clear that investors understood that maturity dates on hybrids could be deferred, sometimes in perpetuity, that dividend or interest payments could be cancelled and that the market value of the securities could fall.