Grant of financial assistance - Trio and Astarra investors
Treasury has announced the grant of financial assistance to affected superannuation fund members with investments in the Trio Capital Limited (Trio) managed investment scheme, the Astarra Strategic Fund.
Trio was the trustee of four superannuation funds (the Astarra Superannuation Plan, the Astarra Personal Pension Plan, the My Retirement Plan and the Employers Federation of NSW Superannuation Plan (collectively referred to as the Funds) and one pooled superannuation trust.
Trio invested some assets of the funds into a managed investment scheme, Astarra Strategic Fund. Most of its assets were directed into what were called hedge funds, located in the Caribbean. There is little, if any, credible evidence that the purported investments were actually made, or if they were, that they have any realisable value. Most of the assets invested were subsequently lost.
As a result, in December 2009 APRA appointed an acting trustee and ASIC suspended Trio’s licence as a fund manager.
The grant of financial assistance
Application for financial assistance
The current trustee of the Funds, ACT Super Management Pty Limited (ACT Super), has made an application to the Minister for Financial Services & Superannuation (The Hon Bill Shorten MP) for financial assistance under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Part 23 of SIS Act allows the trustee of an APRA-regulated fund to apply to the Minister for Financial Services & Superannuation for a grant of financial assistance where it has suffered a loss as a result of fraudulent conduct or theft. It is under the Minister's discretion as to whether or not to grant financial assistance and the amount of that assistance.
The grant of financial assistance
Treasury has announced that financial assistance has been granted. The grant of financial assistance will provide approx. $55 million in financial assistance.
The grant of financial assistance will be provided to the acting trustee, ACT Super. ACT Super is then responsible for the equitable distribution to the superannuation accounts of affected superannuation fund members with investments in Trio’s managed investment scheme, the Astarra Strategic Fund.
There were more than 6,000 investors in the Astarra Strategic Fund. Not all of these investors are eligible for compensation.
Together, the four Trio funds have approximately 10,000 members. Of this 10,000, over 5,000 superannuation members were invested in the Astarra Strategic Fund. It is these members who will directly benefit from the financial assistance.
Indirectly - every member of the four funds involved will benefit, given that the grant of financial assistance includes a portion for investigation and incidental costs borne by all members of the four superannuation funds.
There are also around 690 direct investors in the Astarra Strategic Fund not eligible for financial assistance, of which around 285 are self managed superannuation funds (SMSFs) and the balance either individuals, corporations or trusts.
When will compensation be paid?
Treasury will soon pay the amount of the financial assistance grant to ACT Super. ACT Super must then make distributions within a reasonable time.
Consistent with the manner in which grants have been distributed in the past, ACT Super will require some time to determine the entitlement of each affected member. ACT Super is assessing the eligible loss of each individual member. This may take a few months due to the complexity of this calculation, but will take place as soon as possible.
It is still too early to say how much each superannuation fund member will receive in their account.
Affected members can generally expect to receive back all of their contributions (less any fees or taxes paid) that were lost due to the theft or fraud within the Astarra Strategic Fund, together with a nominal return on capital.
What action has ASIC taken against those involved?
As a result of ASIC’s investigation of Trio, to date more than 10 individuals have either been jailed, banned by ASIC from providing financial services, disqualified from managing corporations or have agreed to remove themselves from participating in the financial services industry for a combined total of more than 50 years. Two of the individuals agreed to lifetime voluntary bannings.
ASIC has entered into EUs with former Trio chairman David Andrews (refer: 11-166MR), and former Trio directors Rex Phillpott and Natasha Beck (refer: 11-133MR), and Keith Finkelde and David O’Bryen (refer: 11-182M).
ASIC has also accepted an EU from Kilara Financial Solutions Pty Ltd (refer: 11-122AD) and from the former operator of the ARP Growth Fund (ARP), Tony Maher - who changed his name from Paul Gresham - permanently preventing him from working in the Australian financial services industry or managing a corporation (refer 12-15MR).
In July 2011, ASIC suspended the Australian financial services (AFS) licence of Seagrims Pty Ltd (refer: 11-134AD). At the request of the company, Seagrims Pty Ltd's licence was cancelled on 19 September 2011. The directors and responsible managers of Seagrim's Pty Ltd, Peter Seagrim and Anne-Marie Seagrim, were both banned by ASIC from providing financial services for three years which was later reduced to six months following an appeal in the Administrative Appeals Tribunal (refer: 11-134AD).
In addition, Shawn Richard, who was a director of the investment manager of the Astarra Strategic Fund, is currently serving a minimum of two and half years in prison after last year pleading guilty to two counts of dishonest conduct in carrying on a financial services business (11-169MR).
Will self-managed superannuation funds (SMSFs) receive compensation?
No, SMSFs will not receive compensation. Part 23 of the SIS Act (which provides for the grant of financial assistance) does not apply to SMSFs.
Will investors other than superannuation fund members receive compensation?
No, investors other than superannuation fund members will not receive compensation. Part 23 of the SIS act does not apply to investors other than funds regulated by APRA.
What happens to people who aren't entitled to compensation?
Those who are not entitled to compensation should consider contacting the Financial Ombudsman Service, which provides an independent mechanism for resolving complaints in situations where a consumer has a complaint about a financial services product or service, including managed investment schemes and financial advice.
People who are not entitled to compensation may also wish to seek independent legal advice as to what options are available.
Those who took financial advice and are not entitled to compensation can consider taking their own action against the financial advisor involved. This can be done through lodging a complaint with the licensee. This should then be dealt with through the licensee’s dispute resolution process.
Some of the financial advisory firms that recommended the Astarra Strategic Fund to their clients are now in liquidation. Their clients may wish to seek legal advice about the options available to them. The Corporations Act requires licensees to have adequate compensation arrangements in place. This generally includes adequate professional indemnity insurance.