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The corporate watchdog is taking Sydney-based Fiducian Investment Management Services Limited (FIMSL) to court, alleging the firm has misled investors about its environment, social and governance (ESG) fund which invested in Rio Tinto, BHP, Newcrest and oil and gas giant Woodside.
Launching civil proceedings in the Supreme Court of NSW, ASIC alleges FIMSL failed to act with care as the manager of the Diversified Social Aspirations Fund, which was available to investors between 2015 and 2024.
The ESG fund’s Product Disclosure Statement (PDS) made claims 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.”
According to the regulator, the underlying funds FIMSL invested in did not exclude any investments in shares or companies that made revenue from fossil fuels, which directly misaligned with the objectives of the ESG statements made in the PDS.
ASIC also claims FIMSL breached its compliance plan by failing to log investor complaints properly and not addressing concerns that the fund held shares in companies like BHP, Rio Tinto and Woodside, despite promising otherwise in its PDS.
The watchdog also alleges FIMSL failed to properly review the fund’s investments, manage ESG risks, follow its own compliance framework or engage an ESG expert as required.
“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,” ASIC deputy chair Sarah Court said.
“Even when alerted that the Fund held investments that were contrary to its PDS, FIMSL continued to re-issue the PDS without making any changes for over nine years.
“We consider it to be unacceptable for entities to capitalise on investors’ interest in ESG investments without ensuring sustainability-related representations are well-founded, transparent and consistent.
Court added that the bar for governance standards that underpin ESG representations for investment products is high.
“ASIC will ensure that entities which we believe may have failed to meet those standards, are held to account.”
FIMSL is a subsidiary of Fiducian Group (ASX: FID), which says it ceased to operate the fund in May 2024 due to a lack of scale. At the time the fund closed, it had $15.6 million in Funds Under Management (FUM) and 158 underlying investors.
According to the company, investors decided to move their money into the two underlying funds, and FIMSL paid the costs of buying and selling the investments to make the transfer.
“FIMS is closely reviewing the court documents and the allegations made by ASIC. As the matter is now before the Court, FIMS or the Company won’t make any other comment at this time,” the company said in an ASX statement to shareholders.
“FIMS has fully cooperated with ASIC’s investigations to date.”
ASIC is asking the court to fine FIMSL, rule that it broke the law and order it to publicly disclose its breaches.
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