Friday 12th of March 2010

Isn’t it odd how one rogue event can taint a whole lot of people and cause government’s into knee jerk reactions. Yes I am talking about KiwiSaver and the Commerce Minister’s statement this week about bringing forward a review of some of the regulatory functions. Some of the ideas such as having the same reporting requirements for default and non-default providers makes sense. But the idea of a “super-regulator” seems to be a huge over-reaction. Why not, instead of creating another government department, make sure the rules in place now are properly enforced? You have to look no further than the trustees on this one. It’s hard to argue against the proposition that trustees failed in their supervision of the finance company sector and their duty to protect investors. Unfortunately we are seeing re-run of this situation. The trustees’ role with KiwiSaver should be more than just making sure the scheme adheres to the trust deed. They should be looking at more than that and looking after investors. I have spoken to some KiwiSaver providers and they are quite amazed at how little trustees do with KiwiSaver funds. The point being you wonder why they are there at all, except to collect fees. There has also been talk about what happens when you have one firm that provides both fund administration services and trustee services to a manager. The argument they can’t tell each other what is going on because of Chinese walls is fine in theory, but looks like a conflict of interest. Maybe the fund administrator should alert the trustee to anything it sees that could be marginal (let alone outright dodgy). Surely that is not too hard to do? Power tells us he has fast tracked work being done by officials on KiwiSaver regulation. Sure they may report back in four weeks time. But when will anything be done? Let alone asking the question does anything need to be done?