KiwiSaver regulation on fast-track

Concerns over the management of KiwiSaver funds has led to Commerce Minister Simon Power fast-tracking work to ensure the integrity of the investments of the 1.3 million people who have $4.88 billion of their money invested in the scheme.

Huljich Wealth Management has brought the spotlight on KiwiSaver account management after it failed to disclose that its then-managing director Peter Huljich had injected cash into the funds because it had not performed well.

Mr Huljich said he felt morally responsible for the investment decisions, but others said it was to give a false impression about the funds' performance. The Securities Commission was investigating.

Australian investment research company Morningstar Australasia has also warned KiwiSaver investors to look closely at their providers, saying there was a very poor disclosure regime in New Zealand.

"In recent weeks there has been growing concern regarding the regulation of KiwiSaver schemes. Mum and dad investors must have confidence that their money is being well managed," Mr Power said.

"The Government indicated last month it supports recommendations from the Capital Market Development Taskforce for additional regulation of managed funds, including KiwiSaver. We were intending to make changes in this area as part of the current review of the Securities Act. However, in light of recent developments, I have asked my officials to fast-track this work to ensure investor confidence is maintained."

Officials had been asked to report within four weeks on whether:

* The monitoring and reporting regime for default funds should be extended to all KiwiSaver funds;

* KiwiSaver funds should be required to regularly report to investors and the regulator on the returns, fees and assets of each fund in a consistent and comparable manner;

* To increase the ability of the regulator to supervise the trustees of KiwiSaver schemes and hold them accountable for fulfilling their obligations;

*Further powers for enforcement by regulators are necessary.

"It must be remembered that though KiwiSaver was set up by government, risk is inherent in investment decisions, and those investments are not guaranteed by government. These changes are designed to plug gaps in regulation which frankly should have been addressed when KiwiSaver was set up," Mr Power said.

The Government is considering merging the various regulatory bodies to create a single watchdog body.

In December, the Capital Market Development Taskforce made 60 recommendations on ways to increase the attractiveness of capital markets to companies and investors.

Mr Power said some of the recommendations the Government was committed to implementing were:

* Introducing plain English into investment statements and prospectuses, with warnings on risky or complex products;

* A more co-ordinated approach to the Government's role in improving the financial literacy of New Zealanders;

* Ensuring the duties of fund managers and supervisors are clear and enforced.

- NZPA