The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Supreme Court of New South Wales against Fiducian Investment Management Services Limited (FIMSL), alleging breaches of its duties as a responsible entity and misleading conduct in relation to its ESG-labelled investment fund.
ASIC claims that FIMSL failed to exercise care and diligence in managing the Diversified Social Aspirations Fund, which operated between 2015 and 2024 as a ‘socially responsible’ investment option. The regulator alleges that the Fund’s Product Disclosure Statement (PDS) misrepresented how its investment strategy worked and contained false and misleading statements.
According to ASIC, while the PDS stated that portfolios would comprise companies with positive environmental and social impacts and exclude certain harmful industries, FIMSL relied on underlying funds with their own ESG methodologies and thresholds that did not align with those commitments. It also allegedly lacked the necessary information to monitor the underlying funds, despite claiming in the PDS that such oversight would occur.
The watchdog further alleges that FIMSL failed to:
- review underlying investments to ensure compliance with the PDS,
- identify and manage ESG-related risks,
- follow its own risk management and compliance framework, and
- engage ESG expertise to monitor the Fund.
ASIC also accuses FIMSL of failing to log and address investor complaints that the Fund held shares in companies such as BHP Billiton, Rio Tinto, Woodside Petroleum, Newcrest Mining and Orica, contrary to the claims made in its disclosure documents.
ASIC Deputy Chair Sarah Court said: “We believe FIMSL’s governance of the Fund provides a clear example of how not to run an ESG fund. We will allege FIMSL took a perfunctory approach to its oversight of the Fund, attracting investors with claims it made no effort to validate, and in failing to independently monitor investments in the Underlying Funds to ensure they were consistent with the representations in the PDS. Even when alerted that the Fund held investments contrary to its PDS, FIMSL continued to re-issue the PDS without making any changes for over nine years.”
Ms Court added that responsible entities must ensure that ESG-related claims are “well-founded, transparent and consistent”, stressing that ASIC will act where governance standards fall short.
ASIC is seeking declarations, financial penalties and adverse publicity orders against FIMSL.
