ASIC has made interim stop orders on one superannuation product and three managed funds promoted by Spaceship Capital Limited (Spaceship Capital) due to deficiencies in their target market determinations (TMDs).  The funds are:

• Spaceship Super, a sub-plan of Tidswell Master Superannuation Plan, issued by Diversa Trustees Limited (Diversa),
• Spaceship Earth Portfolio (ARSN 643 773 282), Spaceship Origin Portfolio (ARSN 623 312 087), and Spaceship Universe Portfolio (ARSN 623 321 022) (together, the Spaceship Voyager Funds), issued by Spaceship Capital as the responsible entity.

The order made in respect of Spaceship Super is the first interim stop order on a superannuation product under the design and distribution obligations (DDO).

The interim orders stop Diversa and Spaceship Capital from issuing interests in, giving a product disclosure statement (PDS) for, or providing financial product advice to retail clients recommending an investment in, Spaceship Super and the Funds.  ASIC made the interim orders to protect consumers and retail investors from acquiring products that may not be suitable for their financial objectives, situation or needs.

Diversa and Spaceship Capital were served the interim stop orders on their products on 31 May 2023. The orders are valid for 21 days unless revoked earlier. ASIC will consider making final orders if the concerns are not addressed in a timely manner. Diversa and Spaceship Capital will have an opportunity to make submissions to ASIC before any final stop orders are made.

Spaceship Super

ASIC considered that the target market in the TMD for the Spaceship Super product was defined too broadly, and had not properly taken into account the risks of the product options.

ASIC’s concerns included:

• the target returns for the investment options were too low to be consistent with investors in the target market, who were identified as seeking high returns;
• a mismatch between the investment risk profile of the investment options (very high) and the return profile identified for investors within the target market (high); and
• insufficient consideration of the investment risk features associated with the investment options, including concentration, market and currency risks arising from the way in which the products are invested.

Furthermore, ASIC considered that the distribution conditions in the TMD were not appropriate to ensure that Spaceship Super would likely be distributed to consumers in the target market.

Spaceship Voyager Funds

ASIC considered that the target markets in the TMDs for the Spaceship Voyager Funds were defined too broadly, and had not properly considered the risks and features of the three funds.

ASIC identified that information within the TMDs for the funds was inconsistent.

ASIC’s concerns included:

• a mismatch between the investment risk profiles of the Spaceship Voyager Funds (very high-risk) and risk profiles identified for investors within the target markets (medium and high). The target markets included investors who intend to hold the funds as a core component (25–75%) or standalone component (75–100%) and the funds invests in a single asset class (i.e. shares);
• a potential investment timeframe of two years or more where the suggested minimum investment timeframe in the PDS is seven years; and
• the target markets included investors with a need to withdraw money daily when withdrawals would usually be paid within five business days and may be suspended or delayed for longer than 21 business days.

Furthermore, ASIC considered that the distribution conditions in the TMDs for all three funds were not appropriate to ensure that the funds would likely be distributed to investors in the target market.

Background

As of 30 June 2022, Spaceship Super had 18,000 members and held approximately $550 million in assets under management (AUM),  Spaceship Earth Portfolio held $40.6 million in AUM, Spaceship Origin Portfolio held $50.8 million in AUM and Spaceship Universe Portfolio held $360.8 million in AUM.

Under DDO, financial product issuers must define target markets for each of their products appropriately, with sufficient granularity, having close regard to the risks and features of the relevant product. Issuers also need to consider how their product will be distributed and have appropriate conditions in place to ensure the product is directed to the target market.

ASIC has targeted surveillances underway to check whether product issuers and distributors are complying with DDO. Report 762 Design and distribution obligations: Investment products outlines ASIC’s observations on how issuers of investment products are meeting their obligations and highlights areas for improvement.

To date, ASIC has issued 40 DDO interim stop orders. Of these, 33 interim stop orders have been lifted following actions taken by the entities to address ASIC’s concerns or where the products were withdrawn, and seven remain in place.

Editor's note:

Following the interim stop orders, Spaceship Capital proposed new TMDs that addressed ASIC's concerns for the three Spaceship Voyager Funds. The new TMDs better define the target market for the funds around investor risk tolerance, investment objectives, investors need to withdraw money and the investment timeframe was amended to align with the PDS. Spaceship Capital also updated the distribution conditions in each of the TMDs.

As a result, on 16 June 2023, ASIC revoked the interim stop orders on the Spaceship Voyager Funds and no final stop orders were made.

Editor's note 2:

Following a hearing on 19 June 2023, ASIC made a further interim stop order prohibiting Diversa from engaging in the same conduct covered by the initial interim stop order. Following the further interim stop order, Diversa made amendments to their TMD document that addressed ASIC's concerns by more adequately describing the class of retail clients in the target market, excluding certain categories of consumers from the target market and updating the distribution conditions.

As a result, on 30 June 2023, ASIC revoked the interim stop order on Spaceship Super and no final stop order was made.