KiwiSaver watchdog seeks teeth

The Government official in charge of monitoring KiwiSaver schemes has called for greater powers to keep the schemes in line.

Government Actuary David Benison said that it would be "nice if we had greater powers".

Asked what type of powers, he said it was not his place to speculate but he advocated greater debate about the need for more regulation.

Mr Benison's office is investigating Huljich Wealth Management, which has rocked the KiwiSaver industry with an admission of inadvertently inflating its market performance rates. The Securities Commission is also investigating.

"Certain people are saying that the regulators should be doing more but, to some extent, you have to have the power to be able to do that.

"We can't go on fishing trips looking for information, so in this particular case we had to make sure there was something we needed to investigate before we started that process." He said while "it would be nice to have more regulation", it was important the cost of compliance was controlled.

Mr Benison's comments follow those of fund research house Morningstar, which criticised New Zealand's KiwiSaver regime as being "rudderless" and not transparent enough. Mr Benison agreed the system probably needed to be "tweaked" but said it bore no comparison to the failings of the finance company sector. The trustee role was much more "hands-on" for KiwiSaver, he said. He felt research houses should do more to ensure their information was accurate.

Morningstar, which rated Huljich highly last year, said it provided a public service and did not have the resources to investigate all fund providers.

On Thursday, Huljich boss Peter Huljich stepped down to allow chairman Don Brash to take over as managing director and chief investment officer.

Mr Huljich skewed the performances of the scheme's three funds by failing to disclose until recently that he had put $150,000 into the funds to compensate for bad investments.

Dr Brash said it had become clear that the board "has not been kept fully informed in a timely manner about certain transactions".

Mr Huljich's father, Chris, would take Mr Huljich's place on the board and Dr Brash would take indefinite leave from his directorship with ANZ Bank. A replacement chairman was being sought.

"I can assure all those who have invested in our KiwiSaver funds – more than 70,000 New Zealanders – that we continue to be absolutely committed to protecting their savings, and growing them in a careful and responsible way," Dr Brash said.

Gareth Morgan, who also runs a KiwiSaver fund, believed Dr Brash's appointment did not solve the performance issue. "Huljich Wealth Management has taken in money on false pretences. It has said its performance has been one thing when ... it has been quite different."

By not giving the money back, it continued to profit from inappropriate actions. "In my book, this demonstrates not just poor judgment, but a total lack of ethics on the part of Don Brash. This is a person who saw himself fit to lead the country. Where the hell is his head at?

"His move to control illicitly obtained monies demonstrates that these directors of HWM are not fit and proper persons to make offers of securities to the public."

Dr Brash responded to criticism about his inexperience in his new role, saying: "I don't claim that funds management is my primary area of expertise, though I was the CEO of an investment bank in the 70s with a successful (albeit small) funds management operation, and was chairman of the trustees of the Reserve Bank pension scheme when I was [Reserve Bank] governor."

- © Fairfax NZ News