Banking (prudential standard) determination No. 6 of 2006 - Prudential Standard APS 120 - Funds Management and Securitisation
Offering adviceOffering advice
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Offering advice
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An ADI may act as adviser to a SPV.
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An ADI may offer investment advice to investors regarding securities issued by SPVs or insurance and other funds management products. It may also act as a broker in obtaining securities (and other products) on behalf of investors or market such products directly to investors. In conducting such business, there is a risk that investors may be confused as to the relationship between an ADI and the issuer of a security (or other product), and a possibility of the ADI feeling some moral or commercial obligation to investors as a result of its actions.
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To minimise the moral risks with providing advice, an ADI should ensure that where it undertakes these activities:
(a) they are conducted with investors or the SPV on an arm’s length basis and on market terms and conditions;
(b) the decision making rests with investors or the SPV, who are aware that they are responsible for, and will bear all risks associated with, the decision taken; and
(c) policies and procedures are in place to ensure that staff (and any agents of the ADI) dealing with investors are appropriately trained and avoid misleading or confusing them concerning the risks involved or the ADI’s relationship with (or support for) the securities and products recommended or offered for sale.
- Where an ADI makes investment decisions or purchases securities for customers or a SPV at the ADI’s own initiative or discretion, the ADI will be deemed to be acting as a “manager” and the provisions below regarding managing will apply.