The Australian Securities and Investments Commission has warned investors looking for products with high interest rate returns, to be wary of these alternatives.

The corporate watchdog has seen a surge in the market for fixed-income products being advertised as “alternatives” or “substitutes” to term deposits.

The warning comes on the back of the regulator taking legal action against investment house Mayfair 101, alleging that its advertisements for its debenture products were misleading and deceptive.

ASIC deputy chair Karen Chester said: “If an investment product offers higher returns than a term deposit, it is more likely than not, to be higher-risk.”

“In the current uncertain and volatile markets, higher-risk investment products are, more than ever, not for everyone – especially for smaller investors, be they retail or wholesome, when they are not investing as part of a diversified portfolio,” she said.

“Be wary of investments that claim to be “like a term deposit.” Products spruiking even a two or three percentage point higher return than a term deposit represent significantly higher risk. We are also seeing products offering only marginally higher returns with much higher risk profiles,” she added.

ASIC observed that many consumers were seeking higher and regular returns on their investments during this time because of low interest rates and market volatility.


“But there are significant differences between term deposits that are relatively low-risk products and fixed-term funds and debentures offering regular, fixed distributions that are higher risk investment products,” said ASIC.

Ms Chester urged investors to seek independent financial advise before buying into products which claim to deliver higher returns.

“Products should not be marketed as having features like low risk of loss, regular returns or easy access to withdrawals unless the product issuer has reasonable grounds to believe they have and will continue to have such features through the economic cycle,” she added.

Last month, the Federal Court stopped investment house Mayfair 101 from promoting its debenture products and prohibited it from using specific words and phrases in its advertising including “fixed term”, “term deposit” and “bank deposit,” according to a report in The Australian.

The court ruled that Mayfair Platinum and Mayfair 101 must post notices on its websites that clearly state the risks for investors including this phrase: “investing in the products offered by the Mayfair 101 Group is not the same as depositing money in a term deposit offered by a bank. Investing in Mayfair 101 Group products has a higher level of risk compared to investing in a bank term deposit.”

Such products are issued by companies which are not well-capitalised, are not protected by the Government’s Financial Claims Scheme and are not supervised by the Australian Prudential Regulation Authority. The products are often backed by portfolios of higher risk unlisted and illiquid assets.

The new warning comes shortly after ASIC said retail investors were playing a “particularly dangerous game” in trying to navigate the share market amidst current volatility.



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