(Based on Australia's Corporate Law)

Question 1

Jane Lack wants to invest $30,000 into a managed fund.

(a) Explain the nature and benefits of a managed fund to Jane.

(b) What sort of things should Jane look at when determining which managed fund she should invest in?

(c) Jane has been advised to "blend managers". Explain this conceptand its benefits.

Question 2

You have just accepted a position at your local newspaper as Mr Money,a financial advice columnist. The following letter arrives in your tray on the first day.

Dear Mr Money,

I have just inherited $100,000 and wish to invest the amount into managed funds. Although I require a little income from the funds, I am mainly interested in long term growth so have decided to invest in Australian domestic shares. I have no other shareholding in my investment portfolio. I would classify myself as a moderately aggressive investor.

Required

(a) Is it better to invest the $100,000 into one fund or across all three funds, and if so, in what proportions?

(b) What alternatives are there to the managed funds that I should consider.

Question 3

Malcolm has shares totalling $25,000 and is seeking to borrow funds to acquire a $50,000 investment in a managed share fund.

(a) What are the benefits and drawbacks of Malcolm borrowing the funds to invest into the managed fund?

(b) What options re gearing could Malcolm use to acquire the managed fund?

Question 4

A client comes to you tells you the following:

"I am 56 years of age and looking at retiring at age 60. I invested $180,000 into an equity managed fund 4 years ago but with the state of the stock market, the fund is now only worth $130,000. The funds will be required for my retirement and I am afraid that with the state of world stock markets, my funds may fall significantly prior to my retirement and I may not have enough to live on. Should I transfer my funds into an interest bearing fund where at least my funds will not disappear?"

What issues would you consider when advising this client?

Question 5

You have recently been appointed as a trainee financial adviser for a large financialinstitution. Your manager asks you to run a training session for the financial advisers.

She asks you to lead a discussion about the role of ASIC in relation to MIS regulation.

REQUIRED:

Describe the role ASIC plays in regulating Managed Investment Schemes.Refer to relevant statute law in your answer.

Question 6

Rita is a 48-year-old primary school teacher who has $180,000 to invest. Rita's money is currently sitting in a Westpac e-saver account earning 0.5% p.a.

Rita sees the following advertisement in the newspaper.

Is your money earning less than 3% p.a?

Make the switch today and discover what IPO Wealth can do for you.

For wholesale and sophisticated investors only. Not available to retail investors. Terms, conditions and risks apply.*

Rita reads the small print and discovers the following:

• The IPO Wealth Fund (Fund) is an unregistered managed investment scheme in the form of an Australian unit trust.
• IPO Wealth Pty Ltd is the Investment Manager of the Fund.
• IPO Wealth Pty Ltd is a Corporate Authorised Representative of D H Flinders Pty Ltd (AFSL # 344486).
• IPO Wealth Pty Ltd.'s authority under its Corporate Authorised Representative Agreement with D H Flinders Pty Ltd is limited to general advice regarding the Fund only.

You are working as a financial adviser and Rita seeks your advice.

Required

Answer the following questions. Refer to relevant legislation and /or case law in all of your responses.

a) Would Rita be classified as a wholesale, sophisticated or retail investor?

b) The facts state that the IPO Wealth Fund is an 'unregistered managed investment scheme'. What is an unregistered managed investment scheme and what are the dangers for investors of investing in these types of schemes?

c) The facts state that 'IPO Wealth Pty Ltd.'s authority under its Corporate Authorised Representative Agreement with D H Flinders Pty Ltd is limited to general advice regarding the Fund only'. Explain to Rita what this means.