I was asked this week by a radio reporter whether the Securities Commission’s guidelines for KiwiSaver providers went far enough.

It sounds like a simple enough question but the funny thing is it was hard to answer, as the guidelines seemed to be a knee-jerk reaction to one incident. Also it seemed this is the sort of thing which should have been done years ago.

The guidelines weren’t the Securities Commission taking enforcement action. They were like a reminder note to managers.

One of the more important and bigger (but relatively unreported) parts of the guidance note was around performance measuring.

The commission is right that there is no consistency at the moment and this doesn’t help consumers.

I know the ISI has been working on developing a new standard for some time. When we see it is a moot point. Hopefully soon.

One could guess that as it is taking so long there is probably a lack of agreement amongst members on what is arguably a critically important event.

Even if the ISI did come up with a standard, what use would it be when around half the KiwiSaver managers are not members of the body?

Then again, you could ask why reinvent the wheel when there are already globally accepted standards for reporting performance?

It leads to the point that maybe it is time for the commission or government to take the lead and set the rules for the industry. The commission alluded to this in its guidelines.

It said: “In the absence of a consensus (on investment performance reporting) the commission may need to consider the need to recommend legislative intervention in this area.”

But will it have the bottle to do so? And how long will it take?

The other point which was pertinent was what the commission said about directors taking responsibility for documents they sign.

As one KiwiSaver manager said to me, a director should be shaking in his boots when it comes time to sign off an investment statement or prospectus.

In the past fortnight two advisers have hit the mainstream headlines for their dodgy operations.

Stephen Versalko, the former high-living ASB adviser, has dominated  headlines over the past 24 hours with his unbelievable spending on hookers and nice wine.

A week before, the Herald wrote about Mike and Jackie Bradley.

I’ve been pondering these and it seems that both advisers have been living the high life in Auckland and spending their ill-gotten gains

Secondly, neither of them are names that have been well know in the advisory industry. In some ways you expect the advisers who have done well to be known by other advisers. You expect to see them at events like IFA conferences and roadshows. Yet our enquiries suggest that both had almost no industry profile.

Another thing, and one which is concerning, is that both advisers had, let’s say, “interesting” approaches to documentation.

Reports suggest that the Bradleys had no records at all and the second had a set of highly doctored and controlled records.

I do have to wonder aloud (again) whether regulation will help tidy these sorts of things up. As I said in the Weekly Wrap, if someone can work within a highly controlled environment like the ASB Bank and commit this level of fraud, what can be done to stop it?

I think the answer is not a lot. If a person is truly interested in committing a fraud they will find some way to do it no matter how tough the rules and regulations are.

The other side of the coin is that there just has to be better financial education for the public. The people who suffered in these cases should have been asking more questions and should know what sort of information they should be given.

This may seem like a big ask, but one could assume, considering the sums of money involved, that the clients were successful and intelligent people who should have known better.

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?

I attended the Morningstar Fund Manager of the Year Awards during the week and there was one topic on everyone’s lips. It wasn’t who was going to take out the gongs that night, but what was going on at Huljich Wealth Management.

A couple of people did wonder if Peter Huljich was going to turn up on the night. Who knows, before all this news broke of what had happened Huljich could have been in the running for one of Morningstar’s awards.

The unanimous theme is what had been done was wrong.

The funny thing though is that it was wrong, but wasn’t a situation where investors were being ripped off. The closest, I think you can come, is that people signed up to the fund under false pretences. They were sold on returns which it turns out are questionable.

There are still unanswered questions though. For instance, why didn’t Brash and Banks know what was going on in the business? They are directors and sign off accounts.

They are not scot-free on this one and have some explaining to do themselves – although I note an explanation is not likely to be coming anytime soon.

Brash makes a point in his press release that says “some of these allegations (made against Huljich) are unfair and some are untrue.”

It would be helpful if he explained them.

Secondly I don’t think changes in the rules around funds would ever prevent this sort of thing happening in the future. The only likely outcome is that penalties for anyone caught could be tougher.

I also note many people have jumped on this story to push their own agendas – particularly the business presses page three pinup Gareth Morgan. Surely we can find someone with less conflicts of interest?

Added to that, Morningstar used it as a hook to push its call for fund managers to disclose all their holdings.

I do have to defend the research houses though. They can’t be expected to audit every managers’ books to confirm the data sent to them. That is ridiculous.

The other oddity here is that Brash is now running the show and is chief investment officer. Sure he ran the country, and used to print money, but can he manage money for investors?

We will be watching the returns to see.