ASIC alleges fund manager breached its duty of care by operating a compliance facade

ASIC’s civil proceedings against Fiducian Investment Management Services Limited (Fiducian) over the now-closed Diversified Social Aspirations Fund (Fund), appear to be less about alleged greenwashing and more about Fiducian’s alleged failure to implement its own compliance controls to ensure that representations it made about the Fund’s investment strategy in disclosure documents were actually true.

Alleged inadequacy of internal controls

The Fund operated between 2015 and 2024 as a ‘socially responsible’ investment option, employing a ‘fund-of-funds’ model whereby it invested in underlying investment funds or through mandates with other managers (Underlying Funds). The proceedings allege these Underlying Funds’ own environmental, social and governance (ESG) exclusion materiality limits and restrictions did not align with the investment constraints outlined in the Fund’s PDS.

ASIC’s claims against Fiducian include that Fiducian maintained a documented governance architecture, including an investment governance framework, risk management framework, and quality assurance process, yet failed to implement these frameworks with operative effect. The allegation is not merely that controls were ineffective, but that they existed in documentary form without practical implementation.

Specifically, ASIC says that Fiducian’s risk registers contained ‘no controls, or alternatively no adequate controls, to ensure compliance with environmental, social and governance (ESG) investing’.

Substantive misalignment between disclosure and holdings

The Fund’s product disclosure statement (PDS) represented to investors that the Fund would apply screens to exclude exposure to companies engaged in activities harmful to society or the environment. Notwithstanding these representations, ASIC alleges that Fiducian channelled Fund capital into Underlying Funds holding material stakes in fossil fuel producers, including BHP, Woodside, and Santos, throughout a multi-year period.

The maintenance of such exposures while issuing successive PDSs affirming unchanged ESG investment objectives constitutes, on ASIC’s allegations, a breach of the misleading or deceptive conduct prohibitions under the Corporations Act 2001 (Cth) and associated disclosure obligations.

Governance failures and duty of care

Between 2019 and the date of the claim, Fiducian received direct notification from its own financial planners that Fund holdings were inconsistent with the Fund’s stated ethical investment objectives. Investor complaints raising substantially identical concerns were also communicated to Fiducian.

ASIC alleges that Fiducian failed to:

• record such complaints within its incident reporting systems;
• escalate findings to the Audit & Risk Committee;
• initiate investigation into potential breaches of ESG commitments; or
• implement corrective remedial measures.

Failure to remediate known compliance issues

According to ASIC, Fiducian’s investment team internally proposed terminating Underlying Fund relationships with Solaris and Candriam, both of which carried material fossil fuel exposure, back in 2021. ASIC alleges that this proposal remained unimplemented and that no formal decision-making process addressed the identified inconsistency between Fund holdings and stated investment policy.

Contemporaneously, Fiducian issued eleven successive versions of the Fund PDS, each containing substantially identical ESG representations, without reconciling disclosure against actual portfolio composition or implementing proposed remedial actions.

Breach of fiduciary duty

As the responsible entity for the Fund, Fiducian owed fiduciary obligations to Fund members, including the obligation to ensure investment management was conducted in accordance with the Fund’s stated investment objectives. This is codified in the Corporations Act in section 601FC(1)(b).

The failure to establish or maintain operative controls to verify compliance with disclosed ESG criteria, coupled with knowledge of misalignment between representation and reality, constitutes alleged breach of the duty of care and loyalty implicit in fiduciary relationships.

Next step?

This matter frames ‘greenwashing’ as a governance gap, not a marketing lapse. For fund managers, the practical standard is simple: ESG statements are operational settings that must match what the portfolio actually does. The safest path is to embed three habits:

1. Align: tie ESG claims to specific controls—mandate terms, exclusion lists, and look-through checks—and keep a single source of truth.
2. Detect: treat any variance (internal review, member feedback, data alerts) as an incident and/or breach with clear owners and timeframes.
3. Resolve: either adjust the holdings or adjust the disclosure—promptly—and keep minutes that show the choice and the rationale.

Working to this rhythm turns ESG promises into verifiable practice and lowers both misleading-conduct and fund manager-duty risk, without adding complexity for well-run schemes.

If you require legal assistance reviewing ESG product governance, compliance frameworks, or responding to regulatory inquiries concerning sustainable investment products, please contact Chris Mee at cmee@cnmlegal.com.au or call 07 3211 4010.