Shares in fund manager Fiducian Group Ltd (ASX: FID) fell more than 3% after the corporate regulator launched a Supreme Court action alleging it engaged in misleading and deceptive conduct about its environmental, social and governance (ESG) fund.
The Australian Securities and Investments Commission (ASIC) is alleging that Fiducian Investment Management Services Limited (FIMSL) "failed to act with care and diligence as the responsible entity of the Diversified Social Aspirations Fund", and has launched civil penalty proceedings in the NSW Supreme Court.
ASIC said the fund was seeking to fill client needs for "socially responsible" or "ethical" investment options and was open for investments between 2015 and 2024.
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Allegation fund failed to follow its own rules
ASIC is alleging that the fund manager used underlying investment funds or other managers that had their own ESG methodologies and thresholds for choosing investments; however, ASIC says these processes did not align with the approach that Fiducian had set out in its product disclosure statement (PDS).
The PDS of the Fund 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'. It also specified a number of industries or activities that the Fund would avoid investing in. ASIC also alleges 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 FIMSL did not have the requisite information to conduct that monitoring.
ASIC is also alleging that FIMSL failed to comply with its compliance plan "when it failed to record and lodge investor complaints … and when it failed to address investor concerns that the fund held investments contrary to the representations made in the PDS such as investments in BHP Billiton Limited, Rio Tinto Limited, Woodside Petroleum Limited, Newcrest Mining Limited and Orica Limited''.
ASIC is seeking declarations, financial penalties, and adverse publicity orders.
Fiducian Group said in a statement to the ASX that it had cooperated with ASIC's investigations to date and "is closely reviewing the court documents and the allegations made''.
As the matter is now before the Court, FIMSL or the company won't make any other comment at this time.
Fidcuian shares were 3.3% lower at $12.73. The company in August reported revenue from ordinary activities of $89.4 million, up 10.6%, and a net profit of $15 million, up 23.5%.
It declared a final dividend of 24.7 cents per share, fully franked. The company will hold its annual general meeting on October 9.
