One of the KiwiSaver funds pulled up by the Financial Markets Authority over potentially misleading statements was deemed to have had inappropriate disclosure of past investment performance and asset allocation disclosures in its advertising material.
The investment watchdog has declined to name the two KiwiSaver issuers highlighted in a report released last week after a review of 15 KiwiSaver schemes.
But yesterday it released details of why it decided to take action against those issuers.
According to the regulator the first fund had insufficient disclosure of key terms and conditions when it came to withdrawals from the fund.
The second fund had inappropriate disclosure of past investment performance and asset allocation disclosures contained in advertising material.
Elaine Campbell, head of compliance monitoring at the FMA, said both funds had since agreed to make changes.
Campbell said the first fund would make the changes shortly and the second fund would amend its advertising material immediately and make changes to its offer document in September.
Both problems were considered to be at the compliance end of its regulatory framework.
Campbell said the regulator had not required the withdrawal of the funds' offer documents nor did it feel the need to issue stop orders.
"Nevertheless, FMA considered that clearer disclosure in each case was required.
"In both cases FMA has achieved the desired compliance by engaging directly with the providers about the issues that FMA has and the improvements it expects to see made."
Campbell said the FMA endeavoured to work with the financial markets sector to help it understand and willingly comply with its expectations.
Exactly which funds were under pressure by the regulator has been hotly talked about around the industry but no names have emerged.
KiwiSaver providers have been careful to protect the image of the retirement savings scheme which has proven to be extremely popular with the public.
One fund manager, who was not a KiwiSaver provider, said he believed the situation had been poorly handled by the regulator.
"If someone is in breach, pull the prospectus. If it's not a major, shut up about it."
By not naming the two KiwiSaver providers it tarnished the whole industry, he said.
The report comes ahead of a new KiwiSaver disclosure regime due to come into force from Monday.
The regime is designed to help standardise reporting of investment returns and fees. Under the regulations, KiwiSaver providers will have to publish one comprehensive disclosure statement every year, and four smaller, quarterly reports.