ASIC has sued the asset management arm of ASX-listed licensee owner Fiducian Group over allegations of misleading and deceptive conduct about a now-closed ESG fund.
The regulator announced on Friday morning that it would take Fiducian Investment Management Services to the Supreme Court of NSW over allegations it breached its duties as a responsible entity due to failure to act with care and diligence as the responsible entity of the Diversified Social Aspirations Fund.
It’s alleged that the firm engaged in misleading and deceptive conduct relating to its description of how the fund works as described in the product disclosure statement (PDS).
This included the company failing to comply with its compliance plan by not recording and lodging investor complaints over concerns the fund held investments in major mining companies BHP Billiton, Rio Tinto, Woodside Petroleum, Newcrest Mining and Orica, contrary to what was represented in the PDS.
ASIC alleged that even when alerted the fund held investments contrary to its PDS, and that it continued to re-issue the document without making any changes for over nine years.
In an announcement to the ASX, Fiducian said the fund ceased to operate in May 2024 due to lack of scale.
“The fund invested client monies in two underlying funds and upon closure, investors with two-thirds of funds invested elected to be transferred to these underlying funds, where [Fiducian Investment Management Services] bore the costs of the buy/sell differential,” the company said.
Fiducian said that, at time of closure, the fund had $15.57 million in funds under management and 158 underlying investors and delivered an annualised return of 7.62 per cent p.a. over the nine years and an 86.61 per cent total return since inception.
The company said it is closely reviewing the court documents and the allegations made by ASIC and would not make any further comment.
The Diversified Social Aspirations Fund was established to meet client demand as a social responsible and ethical investment option for the firm and was available between 2015 and 2024.
The fund selected investments by using underlying fund managers or investment funds which had their own bespoke ESG methodologies, but ASIC alleged this didn’t align with what was included in the PDS.
According to ASIC the fund’s PDS stated that “the share portfolios comprise investments in companies that aim to be positive for society and for the environment and aim to avoid investments in harmful activities”.
ASIC also alleged the PDS of the fund contained false and misleading statements that it would monitor the portfolio exposure and investment styles of the underlying funds in circumstances where Fiducian Investment Management Services did not have the requisite information to conduct that monitoring.
ASIC further alleged Fiducian Investment Management Services failed to comply with its own risk management framework, which included engaging or employing an ESG expert to monitor the fund.
ASIC deputy chair Sarah Court said Fiducian provided a clear example of “how not to run an ESG fund”.
“We consider it to be unacceptable for entities to capitalise on investors’ interest in ESG investments without ensuring sustainability-related representations are well-founded, transparent and consistent,” Court said.
“The bar for governance standards that underpin ESG representations for investment products is high and ASIC will ensure that entities which we believe may have failed to meet those standards, are held to account.”
ASIC said it was seeking declarations, pecuniary penalties and adverse publicity orders.
