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Investment app Spaceship issued stop order – here’s what it means

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Spaceship funds have been paused by ASIC after it identified "deficiencies" in target market determinations.

Popular Australian investment app Spaceship has been forced to pause all customer sign ups and new investments after a stop order was placed by the Australian Securities and Investment Commission (ASIC).

The order affects all Spaceship funds, including its superannuation product Spaceship Super as well as its 3 Voyager portfolios Earth, Origin and Universe.

It marks the first time an interim stop order has been placed on a superannuation product under ASIC's new design and distribution obligations.

Why did ASIC halt activity?

ASIC found Spaceship's target market determinations (TMDs) did not meet regulatory requirements.

TMDs are documents introduced in 2021 that detail which types of customers would be best suited to a firm's investment products.

But in a media release issued Friday morning, ASIC said that Spaceship's target customer base was not clear enough. It also highlighted inconsistencies between the funds' investment risk profiles, its targeted returns and the target markets.

ASIC has been cracking down down on TMD compliance across the industry.

So far, ASIC has issued 40 interim stop orders, and 33 of these have been lifted after the concerns were addressed.

Should customers be concerned about their money?

There's no immediate threat to customer funds when a stop order is issued.

Existing customers can still login to their accounts and withdraw funds, however they'll be unable to make any new investments or switch portfolios until the stop order is lifted.

A statement released by Spaceship on its website said the following:

"Spaceship is taking immediate steps to address ASIC’s concerns and is committed to working proactively to address the issue.

"In the meantime, Spaceship customers may continue to log in to the Spaceship app. While you can't make new investments at this time, you can continue to interact with your current products as normal, including seeing your balance and checking the unit price. We have not suspended withdrawals.

When will the order be lifted?

It's hard to say, however other examples in recent weeks show stop orders can be lifted in a matter of days.

On May 18, a stop order on online broker Saxo Capital Markets was revoked by ASIC 2 days after it was issued due to TMD deficiencies.

The timeline for Spaceship will depend on how quickly the firm is able to amend its TMDs to address ASIC's concerns.

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