La Trobe Financial now faces a significant regulatory challenge, with over $11.8 billion in investment products subject to stop orders from Australia's corporate regulator. The action seeks to protect retail investors from being exposed to financial products that may not align with their risk tolerance, as the firm actively searches for a buyer.
The Australian Securities and Investments Commission (ASIC) issued 21-day stop orders late Thursday after reviewing the private lender’s offerings. The freeze affects La Trobe Financial’s Australian Credit Fund, US Private Credit Fund, 12-Month Term account and 2-Year Account products. ASIC raised concerns about the company’s Target Market Determinations, which are legally required documents outlining the intended audience for each investment product and instructions for its use. According to ASIC, La Trobe Financial has not sufficiently demonstrated that these investments are appropriate for retail or inexperienced investors.
The company holds close to $20 billion in assets and serves more than 120,000 investors. Its products are known for offering relatively high returns within a low-interest environment. However, those higher returns may come with increased risk that retail investors might not fully understand. The stop order does not permanently suspend these products, though it prevents La Trobe Financial from accepting new investments or promoting these offerings during the 21-day period.
This regulatory move could complicate La Trobe Financial’s sale process. Reports suggest the lender has drawn interest from large private equity firms, and its owner, a Canadian pension fund, expects bids soon. Regulatory concerns, however, may prompt potential buyers to re-evaluate both the risks and the company’s overall valuation.
ASIC has recently increased scrutiny of the private credit sector, which includes lending conducted outside traditional banking channels. The regulator is particularly cautious about complex investment strategies being marketed to everyday investors, with concerns around transparency, asset valuations and limited liquidity. Through this intervention, ASIC appears focused on enhancing oversight of this rapidly expanding market to help protect consumers' financial health.
