Equity Trustees fined by ASIC

Equity Trustees was fined nearly $60,000 by the regulator for making misleading statements about the holdings of a sustainable bond fund.

Equity Trustees agreed to pay three infringement notices totalling $56,340 over allegations it made misleading statements about the investments of the Artesian Green and Sustainable Bond Fund. Having paid the notices is not an admission of liability or guilt.

Equity Trustees serves as responsible entity to the fund, which is managed by Artesian Capital Management.

According to ASIC, the fund's product disclosure statement, target market determination and website all stated that the fund invested in green, sustainable and social corporate bonds issued by companies.

The PDS stated: "The Investment Manager's strategy for the fund is to invest in a diversified portfolio of liquid, fixed and floating rate green and sustainable corporate bonds."

In reality, at the time - being between April and November 2024 - the fund had a "significant exposure" to government and supranational bonds which were inconsistent with the fund's advertised strategy and objectives.

ASIC said the statements made would have led investors to believe the fund only invested in bonds issued by corporates. However, some of the holdings were issued by the likes of the Asian Development Bank, European Investment Bank, International Bank for Reconstruction and Development, the Australian Postal Corporation, and TCorp.

The fund aims to provide returns above the Bloomberg AusBond Composite 0-5 Yr Index across all interest rate cycles. Since inception, it's achieved a net return of 2.60% against the benchmark's 1.38%, as at May end.

In 2024, the fund was given a 'Recommended' rating by Zenith and was named the Best New Ethical Fund at the Mindful Money Awards.

"A responsible entity must have measures in place for ensuring it complies with its obligations as an AFS licensee," ASIC deputy chair Sarah Court said.

"These include having adequate governance controls and procedures to ensure that disclosures made in relation to investments by managed investment schemes are accurate and are not misleading.

"ASIC's action should serve as a reminder to trustees that they need to ensure they take their investment governance responsibilities seriously."