Managed investment unit pricing

ASIC has accepted an enforceable undertaking from The Colonial Mutual Life Assurance Society Limited (CMLA), Colonial Mutual Superannuation Pty Limited (CMS) and Commonwealth Custodial Services Limited (CCSL).

The undertaking follows the identification by CMLA, CMS and CCSL of some irregularities with unit-linked investment options offered by CMLA, CMS or CCSL, and managed by CMLA.

CMLA, CMS and CCSL advised ASIC that some unit prices in the unit-linked investment options managed by CMLA were wrong due to the incorrect allocation of imputation tax credits, the incorrect treatment of tax allowances, other tax related problems, and processing irregularities. Investors in some superannuation funds, deposit funds, master funds and master trusts were provided with incorrect information concerning their investments including incorrect account balances and incorrect withdrawal amounts by CMLA or CCSL. CMS and CCSL are approved trustees of the relevant funds and trust.

ASIC's Executive Director of Enforcement, Ms Jan Redfern said ASIC and CMLA, CMS and CCSL agreed to enter into an enforceable undertaking to ensure that investors who had been affected by the unit pricing error were returned to the same position they would have been had the errors not occurred.

CMLA has already rectified unit prices and made restitution to investors in connection with a number of the issues.

As part of the enforceable undertaking, CMLA has undertaken to engage an external compliance consultant, to be approved by ASIC, to review the systems, procedures and processes established by CMLA to ensure that similar issues do not happen again. CMLA has undertaken to report on these requirements to ASIC

CMS and CCSL have also agreed to compensate and notify investors affected by those unit pricing issues, which have not yet been addressed, and to report on this requirement to ASIC.

In December 2004, ASIC and APRA issued a consultation paper seeking industry comment on proposed guidance for good practice in unit pricing.