After releasing Report 384: Regulating complex products as reported by InvestorDaily on Monday, ASIC has updated information on its consumer finance website, MoneySmart, to assist investors in understanding the risks and complexities of hybrid securities.
A quiz has also been developed by ASIC to help investors comprehend the terms of hybrid security offers and encourage them to be fully informed before deciding to invest.
This has mainly been in response to the rise in popularity of hybrid security products, which raised around $18 billion in the 18 months leading to July 2013.
The updated information will explain the difference between hybrid products offered by banks and those offered by companies, and list their features and risks.
It will define what the ‘non-viability’ clauses mean in terms of more recent bank hybrids and compare the two forms of hybrid securities – the capital notes issued by banks and subordinated notes issued by companies – to other asset classes.
ASIC said the information will also break down “common terms found in hybrid prospectuses, so readers can understand what ‘interest deferral’ or ‘loss absorption’ could really mean for them”.
Case studies have been used to explain these terms in practice.
ASIC commissioner John Price said ASIC was committed to addressing the issues these complex products present.
“Investors must think hard about whether hybrids are suitable for them, weigh up the risks, and spread the risks by diversifying,” said Mr Price.
