MLC to compensate investors for losses

MLChas announced that it will compensate investors in its superannuation products who suffered a loss in the value of their investment when they were transferred from similar products provided by MLC’s parent, National Australia Financial Management (NAFM).

More than 270,000 investors in NAFM funds with $4.5 billion under management will collectively receive compensation totalling $60 million.

However, a spokesperson for MLC says the nature of the compensation is yet to be finalised, and the company will contact affected investors in September about the exact method of payment.

The Australian Securities and Investments Commission (ASIC), while welcoming NAB/MLC’s commitment to compensating investments fully of any losses, says it will continue to investigate the matter further, and confirmed it began its investigation into the matter from June this year.

The problem arose on October 30 last year when MLC repriced the units of those investors in super products who had been transferred from NAFM into MLC products in May and June 2001. The MLC products were subsequently closed to new business, according to the MLC spokesperson.

MLC says following closure of the products, there was a net outflow of assets which led to the need of a unit price adjustment to take account of transactional costs. The company adds that the adjustment created no financial benefit to MLC or the National group.

MLC chief executive officer Peter Scott admits that the process was not handled as well as it could have been by the funds manager.

“While satisfied that the October adjustment needed to be made, our communication processes have fallen short of our usual standards. This action ensures that our investors are not disadvantaged by our decisions or the manner in which we implemented or communicated them,” he says.

ASIC’s executive director of financial services regulation, Ian Johnston, says the regulator is now widening the scope of its enquiry after discussions with the National group.

He says the enquiry will continue to focus on five areas relating to the matter, despite MLC undertaking to compensate investors. These are: the circumstances in which NAFM members were transferred to MLC funds; the decision to reprice units in the funds; what communication was or should have been made to fund members; any failure of process or compliance by the trustees of the funds; and the adequacy of the compensation to investors.