THE Australian Securities and Investments Commission (ASIC) has not ruled out the possibility of the combined National Australia/MLC group being required to pay further compensation for losses suffered by investors when a string of National products were closed off in June last year.
ASIC’s executive director of financial services regulation Ian Johnston says the securities regulator has no reason to question the adequacy of the compensation package being offered by National/MLC, but would nevertheless look into the amount as part of its ongoing investigation into the group’s conduct in the matter.
“We don’t have any reason to doubt the amount offered as compensation, but we think that we should satisfy ourselves that the calculation [of the amount of the compensation package] was made on the right basis,” Johnston says.
MLC was prompted earlier this month by a series of complaints and an investigation by ASIC to offer a total compensation package worth $60 million to make good the losses experienced by some 270,000 investors.
In June last year, the National decided to close off some of its superannuation, pension and insurance bond products from new investments and migrate clients across to products offered by its funds management subsidiary, MLC.
However, news of the closures prompted investors to pull their existing assets out of National funds, leaving the group with no option but to cut the price of units in the funds, leading to significant losses for some investors.
MLC chief executive officer Peter Scott says the unit price adjustments created no financial benefit to MLC or the National group. But he admits the whole process was not handled as well as it could have been by the funds manager.
“While satisfied that the [unit price] adjustment needed to be made, our communication processes have fallen short of our usual standards. This action [to provide compensation] ensures that our investors are not disadvantaged by our decisions or the manner in which we implemented or communicated them,” he says.
However, the offer of compensation has not stopped ASIC broadening its investigation into MLC’s and National’s conduct.
“We opened our enquiry into this matter in June. Following discussions with the National group and the receipt of further information from National Australia companies, we are now widening the scope of our enquiry,” Johnston says.
As well as examining the adequacy of compensation to investors, Johnston says ASIC will also focus on the reasons behind the National’s decision to reprice units in the funds and the communications the group should have made to fund members about the changes.
ASIC will also investigate whether the National group broke some of the requirements of the Superannuation Industry Supervision (SIS) Act when it transferred some of its superannuation clients to MLC funds, Johnston says.
“While ASIC welcomes the National’s proposal to fully compensate fund members for loss caused by the unit repricing, our enquiries into this matter will continue,” Johnston says.
