Last week it was announced that up to $55million in financial assistance would be provided to some 5300 victims of the Trio Capital (Astarra) fraud case. Victims who invested in one of four managed super funds through Trio will receive 100% of their super contributions, less any fees & taxes paid, plus a nominal rate of return.
Great News.
But not for all.
This compensation is limited to those who invested directly into Astarra Superannuation Plan, Astarra Personal Pension Plan, MyRetirement plan and Employers' Federation Plan. It doesn't include those who invested in Astarra/Trio products via a Self Managed Super Fund (SMSF).
For those who have lost out in SMSF it is implied that the trustee properly review and understand the products in which it invests, ie that they make informed decisions.
In reality most people who setup a SMSF have an advisor or 2 - one for taxation and one for financial planning. The trustee seeks advice in much the same way as someone who has a retail super fund. And yet for compensation purposes they are treated differently.
Say in the case of a South Australian based dealer that directed hundreds of clients to invest in Astarra, the recommendations clients received were the same...Astarra, Astarra and Astarra. If a dealer who holds a financial services licence can't pick a fraudster how can a trustee? And what does a trustee have available to them (that a dealer absolutely does) to undertake such examinations and research of fund manager credentials?
The key here is a trustee should consider diversification as top of their agenda.
But did the trustees of SMSF invested in Trio believe they were diversified?
In the case of a particular SA dealer, they purported that the Astarra product was diversified as it contained up to 14 fund managers. The problem was, not all the funds were being managed by these 14 reputable fund managers. In particular, the Astarra Strategic Fund was being defrauded. And what's worse, all of the funds within the Astarra platform had an exposure to the strategic fund, thus they have all suffered to a greater or lesser extent.
ASIC is continuing their investigations of dealer groups who recommended Astarra - let's hope that the trustees of SMSF who have lost all or part of their retirement money on advice to invest in Astarra get compensated this way. Is it not negligent that the dealer didn't perform adequate due diligence? And have they been fraudulent in enticing you to take advice (for which you've paid them) and not disclose their personal financial arrangements (undisclosed loans).
I'm looking forward to the disgraced fund manager Shawn Richard (AKA coffee boy) time in court again next month for sentencing....16 months on from when ASIC first put a freeze on Trio, there is still not trace of the missing $115 million.
Hi Sarah
ReplyDeleteWhen you say you hope investors, such as myself who invested personally and through SMSF, are compensated through investigation of dealer groups and, by inference advisers, is this not missing the point?
You earlier questioned whether it is fair some investors are compensated and others are not, and I agree it is not. Shawn Richard was given a licence by ASIC, the fund had external compliance manager in KPMG and auditors in WHK, NAB and ANZ were associated in their role as custodians and trustees of the fund, not to mention the three research houses that gave the fund 5 stars. Why should the adviser be blamed when all of these parties have not done their jobs properly?
I have joined a class action with M&K lawyers against the parties named above, but no-one has convinced me why SMSFs and personal investors in a public offer managed fund, regulated by APRA and ASIC are not compensated when their money is stolen. However blaming the dealer groups and advisers is way off the mark.
cheers Nick
Hi Nick
ReplyDeleteThanks for your comments.
I agree that in this case there should be compensation for SMSFs, absolutely. It is unfair in this instance that all investors not be treated the same way.
There are many parties at fault, as you have mentioned. It seems some dealer groups may also be complicit. Shawn Richard revealed that some dealers entered into secret undisclosed loans - if this is the case you have to wonder did this then encourage those dealer groups to recommend only Astarra to their clients? And did these arrangements contribute to the failure of the dealers completing adequate due diligence.
Say for example you had a SMSF with your money invested in a platform and were advised to move 100% to the Astarra platform to find out later the dealer making these recommendations had financial arrangements, undisclosed, with the fund manager. Do you think that this is ok?
This is a matter of opinion and time will tell ASIC's take on the dealer groups involvement.
Thanks for replying Sarah. I worked for my adviser during the time Astarra froze and know that he was reported in the media to have received "secret commissions" but in fact he disclosed the marketing allowance received in subsequent SOAs. The payment of commission was offerred 6 months after he decided to recommend the fund to his clients.
ReplyDeleteI agree undisclosed payments give rise to the adviser giving advice for reasons other than the client's benefit, but clients signing off on disclosed payments have no right to blame the adviser when the gatekeepers have not done their jobs.
We await justice for all and hopefully the minister moves to tighten regulation of funds and learn from this fraud.