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Hot Topic EARNINGS
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Commission wants standard measure for KiwiSaver funds

The Securities Commission is encouraging the fund management industry to come up with a standard measurement of investment performance in guidelines issued today on Kiwisaver schemes that warn against high-pressure selling methods.The commission said Kiwi

NZPA
Wed, 24 Mar 2010

The Securities Commission is encouraging the fund management industry to come up with a standard measurement of investment performance in guidelines issued today on Kiwisaver schemes that warn against high-pressure selling methods.

The commission said Kiwisaver issuers needed to take care to ensure that disclosures and other promotional materials were accurate, clear, unambiguous and that the methods of distribution were legal, fair and transparent.

"The commission has become aware of a number of circumstances where Kiwisaver membership has been solicited in an unusual, or confusing manner. This type of behaviour is completely unacceptable and damaging to investor confidence," said chairwoman Jane Diplock.

Commerce Minister Simon Power earlier this month asked officials to fast-track work to ensure the integrity of Kiwisaver was maintained for the 1.3 million people and $4.88 billion of their money invested in the scheme.

The move has been called a knee-jerk reaction by some commentators and welcomed by others. The issue arose after Huljich Wealth Management did not disclose two payments by Peter Huljich as compensation for investment decisions he made.

The commission noted in the guidelines issued today that the law did not currently prescribe any particular method of calculating investment performance and that consistency and comparability was highly desirable.

The commission encouraged industry participants, and their industry bodies, to work together to develop a standard method for measuring investment performance consistent with securities law.

"In the absence of a consensus the commission may need to consider the need to recommend legislative intervention in this area."

Commenting on distribution, the commission said approaches to investors about Kiwisaver included door-to-door sales techniques, sales approaches from suppliers of other household services and inclusion of Kiwisaver membership within unrelated household arrangements.

In some cases investors were unaware that they were committing to Kiwisaver membership, with some believing they were purchasing household products. In other cases immediate inducements had been offered for long term membership.

Section 35 of the Securities Act prohibited the offering of securities on a door-to-door sales basis. The commission also believed that other forms of high pressure, or coercive, or misleading selling were inappropriate for Kiwisaver.

The performance statements by Kiwisaver funds should show returns from the investments made by the fund in the ordinary course of its investment mandate.

Transactions with related parties on other than arms length terms, such as at below market prices and ex gratia payments should be excluded from the statement of investment performance and the existence of the transactions clearly disclosed.

While the commission did not currently have jurisdiction in relation to the management conduct of Kiwisaver issuers and managers, it regarded transactions with related parties on other than arms length terms as questionable behaviour.

"The commission will consider making recommendations regarding further regulation in this area during any review of the law relating to Kiwisaver schemes or managed funds generally," the guidelines said.

The Government has been reported to be considering a new super regulator for financial services.

NZPA
Wed, 24 Mar 2010
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Commission wants standard measure for KiwiSaver funds
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