Complaints about unit trusts range from a late statement to a suspicion that the trustee is taking fees it is not entitled to. The Capital Market Act 2015 and the Securities Commission Act 2015 provide a ladder of remedies. Climb it in order, keeping copies of everything.
Step one: use the deed’s complaints procedure
The trust deed “shall make adequate provision for … the method by which complaints made by members in relation to the scheme are to be dealt with”.
The Securities Commission may not register a scheme whose deed lacks this provision (section 186(1)(c)), so every registered scheme has a procedure. It will typically name the officer to write to, set response times and provide for escalation to the trustee’s board. Put the complaint in writing, state what happened and when, attach the evidence, say what you want done, and keep a dated copy. Because the deed is legally enforceable between members and the trustee (section 212), a trustee that ignores its own procedure is in breach of contract. Ask for the trustee’s final written response; the Commission and the Court will want to see it.
The trustee’s own duty to report
Section 191(1)(j) requires the trustee to report to the Commission, as soon as practicable after becoming aware of it, any breach of the Act relating to the scheme that “has had, or is likely to have, a materially adverse effect on the interests of members”. Failure is an offence carrying a fine of up to K10 million or ten years’ imprisonment, or both (section 191(4)). A well-founded complaint therefore puts the trustee on notice that it may itself have to report the matter. Mention section 191(1)(j) in your letter and ask whether a report has been made.
Step two: complain to the Securities Commission
If the deed procedure produces no satisfactory answer, or the matter is serious, write to the Securities Commission of Papua New Guinea in Port Moresby. Section 106(1) of the Securities Commission Act provides that the information in a complaint and the identity of the complainant “shall be confidentially classified information between the Commission and the person who lodged the complaint”, and section 106(2)–(3) prevents that identity being disclosed or ordered to be disclosed in any court or tribunal. Knowingly giving false information is an offence punishable by a fine of up to K10 million or ten years’ imprisonment (section 106(4)).
The Commission may investigate where it has reason to suspect a breach of the securities laws or a contravention involving the affairs of a managed investment scheme or unit trust (section 54), appoint Investigating Officers (section 55), examine the trustee’s officers and books (sections 66 to 68) and hold an inquiry (section 72). It may also carry out surveillance checks on compliance with the deed and the Act at any time, and the trustee must assist (Capital Market Act section 196). See how the Commission investigates.
What the Commission can do about it
| Power | Source | Effect |
|---|---|---|
| Direct compliance, reprimand, penalty up to K5 million, order restitution | CMA s 443(3) | Any person in breach, including a trustee under s 189 |
| Direct compliance, reprimand, penalty up to K10 million, order restitution | CMA s 445(2) | Licensed persons whose conduct jeopardises clients or the public interest |
| Revoke or suspend the licence; impose restrictions | CMA s 48 | Trustee ceases to be licensed; interim trustee appointed under s 202 |
| Sue to recover assets on a unit holder’s behalf | SC Act s 101 | Civil recovery in the National Court without cost to the member |
| Prosecute, with the Public Prosecutor’s consent | SC Act ss 83, 102 | Criminal proceedings for offences under the Acts |
Before acting under sections 443 or 445 the Commission must give the trustee an opportunity to be heard (sections 443(4), 445(3)). Unpaid restitution may be recovered by the Commission as a civil debt due to the aggrieved members (section 445(7)). The Pacific Balance Fund shows the process at its most serious: a 2018 review led to restrictions on the trustee and, in 2023, to revocation of its licence and appointment of an interim trustee. See administrative penalties.
Step three: go to the National Court
A member who has suffered loss or damage because of conduct of the trustee that contravenes the Act may sue the trustee to recover it, whether or not the trustee has been convicted or penalised, provided the action is started within six years after the cause of action arises (section 262). Section 262(1) refers to contraventions of “this division”, which read literally covers only sections 262 and 263; the evident intention is to cover breaches of Part V, but the drafting is open to argument. The Court may also make “any order which it considers appropriate to protect the interests of existing or prospective members” (section 256(1)), rectify the register (section 253), appoint an interim trustee if the Commission has not (section 203) and order a winding up on just and equitable grounds (section 267). Separate civil actions lie for prospectus misstatements (section 446) and market misconduct (section 323). See suing the trustee.
Act together where you can. Members holding 10 percent of the votes, or 100 members, can force a meeting and put resolutions (sections 214 and 223), including a resolution to remove the trustee (section 201). A complaint backed by a members’ resolution carries more weight with the Commission than a single letter. For small losses the Commission’s power to sue on your behalf under section 101 of the Securities Commission Act is more realistic than funding your own proceedings, and a lawyer can help frame the request.
Sources
- Capital Market Act 2015 — ss 48, 186, 191(1)(j), 191(4), 196, 201, 202, 203, 210(1)(c), 212, 214, 223, 253, 256, 262, 267, 323, 443, 445, 446
- Securities Commission Act 2015 — ss 54, 55, 66–68, 72, 83, 101, 102, 106
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.