The corporate watchdog is looking into a new investment product issued by Mayfair 101, the group that has bought the cyclone-ravaged Dunk Island resort, after alleging in court that it had misled people by comparing its previous offerings to bank term deposits.
On Thursday, the Australian Securities and Investments Commission issued a general warning against advertisements that compare fixed-interest products to bank term deposits as part of a broader crackdown on potentially misleading marketing by investment groups.
The increased focus on investment advertising comes after federal court action in which Asic accused Mayfair 101 of misleading and deceptive conduct in advertising and marketing two of its products, M+ Fixed Income and M Core Fixed Income, by comparing them to term deposits.
During that court case Asic also raised concerns about the solvency of Mayfair 101, after founder James Mawhinney said in an affidavit that the group would need to find new sources of money to fund its commitments if the two products were banned.
On 16 April the court ordered Mayfair 101 not to advertise the two products, which it had heavily promoted through website termdepositguide.com and in newspaper ads, and into which investors have pumped a total of $140m.
The following week, on 22 April, Mayfair 101 launched a new product, a “property bond”, that it said would be used “to power Mission Beach and Dunk Island revival”.
Dunk Island is Mayfair 101’s flagship project. The company bought it from the family of Linc Energy founder Peter Bond for $31m last year, and launched its plans to revitalise the entire area at a glitzy party on the island attended by Instagram influencers, the singer Ricki-Lee and independent MP Bob Katter.
As Guardian Australia has reported, the investment group needed cash totalling $135m by September to complete the purchase of more than 200 properties in the Mission Beach area, close to Dunk Island.
Mayfair 101 is defending itself against Asic’s legal actions and has previously said it is committed to completing the project. “The group has the support of some significant investors who consider our strategy in Mission Beach to be timely given the desire for people to live in lower-density regions,” it told Guardian Australia in late March.
The group has previously said its financial products are “fully compliant” with the law and that it “has cooperated with all Asic’s information requests and has already added additional information to its website and materials to further ensure investors are fully informed about the risks and rewards of its investment products”.
The federal court has ordered Asic not to issue a specific warning against Mayfair 101’s products without giving the company two days’ notice.
However, Thursday’s warning does not name any product issuers and Asic’s warning is also aimed at other companies offering similar products.
Bird said anxious investors were looking for safe options amid the coronavirus crisis.
“We’d hate to see them think, ‘I need to do something safe with my money,’ and end up in one of these products,” she said.
She said Asic was also aware of Mayfair 101’s new high-interest “Australian Property Bonds”, which are advertised as “an effective way to generate a yield on your idle money with the security support of registered first mortgages over properties of your choice in Australia’s upcoming tourism mecca – Mission Beach, Queensland”.
“We are looking at that product,” she said.
However, she declined to say what action Asic might take over the bonds, which offer interest rates of up to 9.2% a month.
Asic’s head of investment managers, Rhys Bollen, said other types of advertising Asic was looking at included representations that funds invested in cash when in fact they did not, as well as statements about the assets backing investments and the ease of withdrawal.
“We’re going to build on this theme over the next little while,” he said.
Mayfair 101 has been contacted for comment.
