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KiwiSaver providers who mislead investors over their commitment to responsible investment could face fines of up to $300,000 or five years in prison.
Securities Commission general counsel Liam Mason yesterday told those attending a conference for socially responsible investment that the Government watchdog would take a broad view on what defined responsible investment but a tough stance on any who actively misled, deceived or confused investors.
A law that forces KiwiSaver providers to disclose whether they do take responsible investment into account when investing came into play on April 1.
All providers have to declare their stance in investment, offer documents and provide further evidence of their policies and processes in a manner that is free and easily accessible if they provide responsible investment.
Responsible investment generally takes into account environmental, social and governance factors.
But Mr Mason said the present environmental, social and governance label was too elusive for the commission to define so it was taking a broad approach.
"We are not going to say what is or is not responsible investment. Our view is that this is intended to ask issuers to take into account factors that might be outside of usual financial considerations."
But, he said, concerns that the industry would "window dress" the disclosure meant that freedom would come at a price.
"The statement is taken to be part of securities regulation, and enforcement options are available if the provider deceives or misleads investors."
Punishment options include pulling the company's investment statement as well as criminal action which has maximum penalties of up to $300,000 in fines and five years' imprisonment.
Providers have been given guidance that says they must not deceive, mislead or confuse investors with their disclosure and they must stick to the facts as well as avoiding or explaining jargon.
The funds have until the end of July to get the documentation into their marketing material and a grace period to get all their disclosures in place until the end of September, when the commission is planning to undertake a review of the responsible investment disclosure.
