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Issue 23 - October 2015

The FOS Approach to Fixed Interest Investments

 

A ‘fixed interest’ investment is one that pays a regular rate of interest for a specified term with the expectation that the principal will be repaid at the end of the term (maturity date). Traditionally such investments are considered safe, secure investments, but this is not always the case.

The interest rate can be set (fixed), or it can change over the term of the investment (variable).

Fixed interest investments are usually issued by corporations, government and semi-government bodies and financial institutions, such as banks, to raise funds.

This document provides information on FOS’s approach to disputes about these investments.

Generally disputes are lodged with FOS about whether a particular fixed interest investment was appropriate for the investor or that an advisor did not disclose the risks of the investment.

In considering such disputes FOS needs to understand:

  • what the investor was actually invested in
  • the rate of return promised
  • who issued the investment.

Once this assessment has been made, FOS can then determine whether the investment was appropriate for the Applicant’s circumstances and whether the advisor adequately disclosed the risks of the investment, particularly the risks of capital loss.

Read more about the FOS Approach to Fixed Interest Investments.

Visit www.fos.org.au/approach to see all the available FOS Approach documents.

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