-
Jail for Trio frontman 3
Trio's Richard jailed for 2 years over stolen super 5
Andrews given nine-year ban, Richard facing time in the can
6
Burning questions remain over super theft 8
Words will not save Richard from jail time 11
How regulator missed chance in Trio debacle 13
Trio CEO accepts a 15-year ban from ASIC 15
'Raised concern' on hedge funds 17
Parliament to probe Trio Capital fraud claims 19
DIY funds need compensation too 20
Cold comfort for forgotten victims of Trio Capital fiasco 22
Move to compensate investors for bad financial advice 23
Investors deserve a softer landing than concrete 25
Couple of clowns duped in super scam muddy waters for true
victims 27
Largest government payout of $55m for Trio super fraud 29
DIY super funds given cold shoulder in Trio payout 31
Super bailout excludes DIY investors 33
Ombudsman's name and shame list a bold step forward 35
No safety net for $400bn in DIY super 37
DIY super fund investors warned of no compensation from fraud
38
THE DISTILLERY: Murky waters 40
Self-managed super and the Trio trap 42
Transfers to Trio chiefs queried 44
Trio's $170m has vanished 45
Three pennies in the fountain of Trio Capital losses 46
Advisers' former staffers help Trio investigators 48
List of alleged Trio offences sent to ASIC 49
TypewriterFACTIVA SEARCH; "ARP GROWTH FUND"AUGUST 28, 2011
eliuTypewriterPublications after Oct 21, 2010
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ASIC gets list of Trio suspicions 50
AUSTRALIAN NEWSPAPER HIGHLIGHTS - MAY 19, 2010 51
Trio debacle could cost $180m-plus 53
Trio administrator seeks answers in HK 54
Judge blasts Trio 'scam' 55
Crime probe on Trio directors 57
Corporate regulator investigates former directors at Trio
Capital 58
No safety net for self-managed super 60
How investors in Trio backed the wrong horse 62
Trio funds trail lead to Germany 67
Trio funds told to wind up 68
ASIC refuses to release Trio details 69
Case being prepared for Trio government compensation 70
Trio Capital forged iron triangle of self-interest 72
ASIC must move quickly on Trio fund 74
Fraud fear in Trio fund's lost $45m 76
CRISIS CATCHES MYSTERY MEN OUT 78
Trio funds wound up as hunt for lost millions widens 81
Wind-up move on Trio funds 83
Mystery deepens over missing Trio funds 85
Trio directors surrender passports 87
Trio Capital holding $1.5m 'risky' asset 89
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J a i l f o r T r i o f r o n t m a n
SE NewsHD Jail for Trio frontman BY By STUART WASHINGTON and
MICHELE TYDDWC 429 wordsPD 13 August 2011SN Illawarra MercurySC
ILMED FirstPG 3LA EnglishCY 2011 Copyright John Fairfax Holdings
Limited. LP
Light sentence stirs investor ire THE frontman for Australia's
largest superannuation theft has been sentenced to a minimum oftwo
years and six months in jail.
TDAppearing drawn and unshaven in the NSW Supreme Court
yesterday, Shawn Richard, 36, wassentenced for his role in the
disappearance of $26.6 million from Albury fund manager
TrioCapital. The decision has left solicitor Mark McDonald, who is
representing about 100 Illawarra victims in acompensation case,
surprised and disappointed. "I thought Richard would get more and
I'm intrigued as to the length of that sentence. It seemslight for
what he did but obviously there were a lot of issues that the judge
has taken into accountwhich I would not be aware of. "But I'm
pleased at least to see a sentencing outcome for one of the players
in this matter," hesaid. Robert Harley, from Wollongong, who lost
about $40,000 invested in the scheme, said he thoughtthe sentence
would be closer to 10 years for the suffering Richard had inflicted
on so manypeople. "I've moved on but I've spoken to and read about
people who lost everything and will neverrecover," he added.
Richard, widely known by his Facebook nickname Shawny Cash, was
sentenced on two counts ofdishonest conduct, including secretly
receiving $1.3 million paid into offshore bank accounts
inLiechtenstein and Curaao. Investors have lost a total of $180
million invested in Astarra Strategic and ARP Growth that werethen
placed into offshore hedge funds controlled by Hong Kong
businessman Jack Flader. Justice Peter Garling set a maximum period
of three years and nine months. The decision aboutthe lower minimum
immediately provoked ire from Trio investors. "I don't think the
custodial sentence agrees with the extent of criminality," a Trio
investor, BrianLarking, said outside the court. "Two years and six
months compared with the millions he's sentoffshore under Jack
Flader ... plus the fact he got that $1.3 million." Justice Garling
said Richard was guilty of serious crimes of a high order that were
carefullyplanned, concealed and involved a "staggeringly large
sum". "He was the central figure in Australia without whose
participation these offences could not haveoccurred," the judge
said. Justice Garling gave Richard a 25 per cent discount on his
sentence for contrition, includingpleading guilty at the first
available opportunity, and a further 12.5 per cent for
undisclosedassistance in another matter.
RE austr : Australia | apacz : Asia Pacific | ausnz :
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ILM0000020110815e78d00013
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T r i o ' s R i c h a r d j a i l e d f o r 2 y e a r s o v e r
s t o l e n s u p e r
SE BusinessHD Trio's Richard jailed for 2 years over stolen
super BY Stuart WashingtonWC 382 wordsPD 13 August 2011SN The
Sydney Morning HeraldSC SMHHED FirstPG 3LA EnglishCY 2011 Copyright
John Fairfax Holdings Limited. LP
COURTS A SMOOTH-TALKING Canadian patsy took the fall for
Australia's largest superannuation theftyesterday, but the major
beneficiary of the crime remains at large.
TDShawn Richard, known by his Facebook nickname Shawny Cash, was
sentenced in the NSWSupreme Court to a minimum of two-and-a-half
years in jail yesterday. The sentence immediately attracted the ire
of investors in Trio Capital, which collapsed in late2009. Trio
investors lost $180 million sent to offshore hedge funds through
Astarra Strategic and Growth. "We will be paying for many more
years," Beth Roffe, a Wollongong investor who lost $500,000and is
living on the pension, said outside the court yesterday. John
Hempton, a fund manager who first exposed the fraud, said: "This
has caused a very largenumber of people a very large amount of
pain. If he had mugged three of those people and tooktheir purses
he would have probably got a longer sentence." Richard, 36, looked
haggard and unshaven as Justice Peter Garling found he was
"motivatedsimply by greed" when he directed $26.6 million into
offshore funds, knowing the money wasbeing stolen. But Justice
Garling's sentencing remarks show that a US citizen based in Hong
Kong called JackFlader was the real mastermind and major
beneficiary. Mr Flader remains at large. Justice Garling sentenced
Richard to a maximum sentence of three years and nine months. He
said he was prepared to accept Richard, described as "ripe for the
picking" by his lawyer, hadbeen naive and gullible when he started
working for Mr Flader. But he said benefits Richardreceived
included secret payments of $1.3 million to personal bank accounts
in Liechtenstein andCuracao and payments to his company of $5.3
million. "Mr Richard is guilty of serious crimes of a high order.
They were carefully considered andplanned, they were concealed,
they continued over a period of nearly four years and they led
tosignificant financial losses," Justice Garling said. "Whilst he
may not have been the ultimate controller, a role attributed to Mr
Flader, he was thecentral figure in Australia, without whose
participation these offences could not have occurred."
NS gtheft : Burglary/Theft | gcat : Political/General News |
gcrim : Crime/Courts RE austr : Australia | apacz : Asia Pacific |
ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited
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A n d r e w s g i v e n n i n e - y e a r b a n , R i c h a r d
f a c i n g t i m e i n t h e c a n
SE BusinessHD Andrews given nine-year ban, Richard facing time
in the can BY Stuart WashingtonWC 379 wordsPD 12 August 2011SN The
Sydney Morning HeraldSC SMHHED ThirdPG 6LA EnglishCY 2011 Copyright
John Fairfax Holdings Limited. LP
FINANCE Then those pathetic putrid looters?
TDCame up behind me to bully, ambush and bash - Callous bulls in
a fragile china shop/Plundering nothing less than someone else's
cash THE bard of Trio Capital has written his last stanza in the
saga of the theft of $180 million fromAustralian investors.
Yesterday David Andrews, 59, a former chairman of Trio, was banned
from financial services andbeing a director for nine years, the
longest suspension yet handed to three Trio directors whofailed to
protect investors. Today the investment manager of Trio, Shawn
Richard, is due to be sentenced to up to 10 yearsin jail. More than
$180 million has been lost in two offshore hedge funds run by Trio,
Astarra Strategicand ARP Growth. The Herald revealed last year that
Mr Andrews was the author of what appeared to be a
lightlyfictionalised account of the Trio imbroglio under his pen
name, David Morisset. The excerpt featured a shady Hong Kong
businessman, high-octane hedge funds and a murder ina red light
district - all elements of Australia's largest superannuation theft
from the sleepy Alburyfund manager chaired by Mr Andrews. Mr
Andrews's writings after the Trio collapse included the
confessional poems Loser (quotedabove) and Fanfare for Failure.
While silent on Mr Andrews's highly commended talent as a poet, the
chairman of the AustralianSecurities and Investments Commission,
Greg Medcraft, gave him a scathing review. "We believe Mr Andrews
failed in his duties as officer of the responsible entity of the
AstarraStrategic Fund and therefore it's inappropriate for him to
be involved in the financial servicesindustry or act as director,"
Mr Medcraft said. Mr Andrews was an economist who worked for seven
years with the Australian Anglican Church'sfunds management arm,
Glebe Asset Management, before joining Trio in 2005. At Trio he
chaired the board and also held roles as chairman of the investment
committee andchairman of the risk and compliance committee. An
enforceable undertaking shows how during Mr Andrews's time at Trio
millions of dollars weredirected into the Astarra Strategic hedge
fund without conducting proper valuations.
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Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management
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B u r n i n g q u e s t i o n s r e m a i n o v e r s u p e r t
h e f t
SE BusinessHD Burning questions remain over super theft BY
Stuart WashingtonWC 1,467 wordsPD 28 July 2011SN The Sydney Morning
HeraldSC SMHHED FirstPG 7LA EnglishCY 2011 Copyright John Fairfax
Holdings Limited. LP
TRIO CAPITAL FRAUD How did 'Shawny Cash' manage to conceal his
crimes for so long, asks Stuart Washington.
TDAn air of exasperated disbelief radiated from the bench on
Friday as Justice Peter Garlingconsidered the fate of the man
guilty of Australia's largest superannuation theft. Where were the
auditors, Justice Garling asked under the lofty ceiling of
courtroom one in the oldSupreme Court House. What was Trio
Capital's investment committee doing? What about TrioCapital's
board of directors? Implicit in Justice Garling's questions was the
puzzle of how the mild looking man sitting beforehim, 36-year-old
Shawn Richard, could have been allowed to get away with so much for
so long. As we now know, the Albury-based fund manager Trio Capital
spirited away $180 million into twohedge funds, Astarra Strategic
and ARP Growth, from 2005 and probably earlier. Richard's "success"
is at odds with his inauspicious background. The man dubbed "Shawny
Cash" only had a high school education from the modest middle
classneighbourhood of the largely French-speaking Dieppe in New
Brunswick, Canada. He dropped out of his local Moncton University,
later lying in Australia he had a bachelor's degreein finance from
the same institution. Richard's lawyer, John Agius SC, argued last
week that Richard had been naive andpsychologically vulnerable to
the lure of the high-powered role in financial services offered by
hisboss, Jack Flader. Richard was on an overseas trip looking for
adventure, landing up in Taiwan, when he first metFlader in the
late 1990s. "He [Richard] was someone going nowhere in particular
and going there at no speed," Agius said. Richard last year
described his role in Taiwan as "office boy" - not the grandiose
"vice-president"he labelled himself in his online investment
manager's biography. Flader, a US lawyer based in Hong Kong, is a
noted bon vivant who enjoys what he calls "thenoble grape",
particularly $250-odd bottles of Carruades de Lafite. It is of no
comfort to Australian investors that they almost certainly funded
Flader's jet-settinglifestyle, in which he crossed the globe to
visit 80 destinations in three years as head of hisbusiness, Global
Consultants and Services Ltd. Flader emerges in the statement of
facts tendered before court on Friday as the mastermind ofthe whole
scheme. Whether the source of the cash ever rested poorly with
Flader as he sampled the "ocean of finewines" and enjoyed 10 hours
of massages at the $1500-a-night Bulgari resort in 2007 has notbeen
established.
Page 8 of 89 2011 Factiva, Inc. All rights reserved.
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He has not been available for interview. While offshore
miscreants escape sanction, Richard was the man placed in jail on
Friday awaitingsentence on August 12. In court, he was described as
the frontman and pivotal to the whole scheme. Richard has pleaded
guilty to two counts of dishonest conduct. The charges relate to
seveninstances of dishonesty between November 2005 and September
2009. In short, the counts state he knew he was personally
benefiting by placing investors' money infunds he was lying about.
On Friday the Crown's case against Richard showed how he illegally
enriched himself throughsecret payments of $1.3 million channelled
through bank accounts in the tax havens ofLiechtenstein and
Curacao. In 2009 Richard blew at least $250,000 on personal
expenses, including $67,000 on rent. In total, Richard's company,
Astarra Asset Management (AAM), would receive $6.55 million
inillegal payments. But the jig was nearly up. In September 2009,
Bronte Capital fund manager and blogger JohnHempton informed the
corporate regulator of concerns about what has become Australia's
largestsuperannuation fraud. In December 2009, 10,000 investors in
Trio Capital had more than $400 million frozen as theregulator put
in place liquidators and trustees to piece together just what
happened. In April this year, investors in superannuation funds
regulated by the Australian PrudentialRegulation Authority were
awarded $55 million in compensation because they had beensubjected
to fraud. In court on Friday, Justice Garling's puzzlement extended
to the exclusion of self-managedsuperannuation investors from any
compensation for fraud in Trio Capital. It is a puzzlement shared
by self-managed super investors themselves, who now find
themselveslocked out of any meaningful compensation. In a recent
submission to a federal parliamentary inquiry into Trio Capital, a
68-year-old SouthCoast man, Philip Keeffe, wrote after losing
$70,000: "That the Commonwealth has failed tocreate a secure
environment for these investors, as well as failing to compensate
them for losses... is simply shameful." Justice Garling's questions
about the role of Trio Capital's gatekeepers extended to the
supposedattractiveness of the offshore investments. "Excuse me,
what is the fund you have put your money into?" Justice Garling
said on Friday,adopting the voice of Trio's auditor. "Please prove
the worth of those funds to me? That's what auditors are supposed
to do, isn't it? "One can't avoid at least the observation and
reflection when looking at this that there were anumber of other
bodies that were asleep on duty here." The opaque nature of the
offshore investment vehicles is amply demonstrated in the statement
offacts before the court. One fund called the SBS Dynamic
Opportunities Fund had a Liberian company as soleshareholder and
director, an Anguillan company as investment manager, a Cayman
Islands bankaccount and a Belize company as its administrator. But
in a common thread with all four offshore funds that became
destinations for Australianinvestors' money, the fund was actually
administered by the company Flader founded in 2006,GCSL. The round
robin of Australian investors' funds that were placed in exotic
offshore investmentvehicles is documented at its simplest in the
first case of dishonesty admitted by Shawn Richard. He was the
investment manager for Trio Capital through his company AAM, with
the responsibility
Page 9 of 89 2011 Factiva, Inc. All rights reserved.
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of placing investors' funds into the ultimate investment
vehicles. In this role in November 2005 he arranged for $3 million
invested in Astarra Strategic Fund (thenknown as the Alpha
Strategic Fund) to be placed in the Exploration Fund, which was one
of theoffshore funds administered by GCSL and controlled by Flader.
The money was then used to "buy" $US1.75 million in shares in
Yarraman Winery, a small wineryup a windy road in the Hunter
Valley. The winery exists to this day, and is not implicated in the
activities concerning its shares.However, its shares from its
listing on the "over-the-counter" pink sheets market in the US
werepractically worthless. In what was a leitmotif for the scheme,
Australian money invested in a fund controlled by Fladerwould be
used as cash to pay another controlled company by Flader for
practically worthlessshares. From the considerable profits from
this transaction, $US818,000 ended up in a bank account inthe tiny
Caribbean island of Curacao, to the benefit of Richard. In summary,
$3 million in Australian money controlled by Richard was placed in
an offshore fundrun by Flader, used to buy $US1.75 million in
worthless shares from Flader, then Richard wassecretly paid
$US818,000. As Richard endures a lengthy prison sentence - the two
counts carry a maximum sentence of 10years in total - he may have
cause to think about his former mentor. Flader has purportedly sold
his GCSL business to a boutique investment bank, Jeeves Group,
runby a father and son found guilty in absentia of a major US
investment fraud. Not coincidentally,Flader was named as being
involved in the same fraud. The GCSL website is no longer
operating. Others named in the court documents include Frank
Richard Bell, the veteran British broker with adisgraceful track
record who ran the Exploration Fund. Then there is Carl Meerveld,
named in court documents as a director of the Exploration and
SierraMulti-Strategy Funds, and Roman Lyniuk, named as the key
investment professional of the PacificCapital Multi-Arbitrage Fund.
Needless to say, no money has been recovered from these funds. In
Australia, there have been more visible repercussions. Earlier this
month Rex Phillpott, Trio's chief executive, was banned from
financial services for 15years. Natasha Beck, a Trio director, was
banned from financial services for five years. A South Australian
financial planner, Seagrims, has been forced to give up its licence
and itsowners have also been banned from financial services for
three years. In the case of Trio's auditors, WHK, there has been no
formal action to date. Action is likely to roll on for some time.
And as for Richard he, alone, is going to jail.
NS gdtcsh : Money Laundering | gcat : Political/General News |
gcrim : Crime/Courts | gfinc : FinancialCrime | ncat : Content
Types | nfact : Factiva Filters | nfcpex : FC&E Executive News
Filter
RE austr : Australia | apacz : Asia Pacific | ausnz :
Australia/Oceania PUB Fairfax Media Management Pty Limited AN
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W o r d s w i l l n o t s a v e R i c h a r d f r o m j a i l t
i m e
SE Business - Opinion & AnalysisHD Words will not save
Richard from jail time BY STUART WASHINGTONWC 870 wordsPD 25 July
2011SN The Sydney Morning HeraldSC SMHHED FirstPG 7LA EnglishCY
2011 Copyright John Fairfax Holdings Limited. LP
When Shawn Richard sought character references as he faced a
lengthy jail sentence, there werea few people from his past he felt
he could ask. Even the mention of Richard's name would be bad news
to investors in the Albury-based fundmanager Trio Capital.
TDInvestors had more than $400 million in funds frozen in
December 2009 when Australia's largestsuperannuation theft was
first uncovered. So investors would not be among those likely to
give the most glowing assessments of theCanadian-born investment
manager. Richard, 36, faced a sentencing hearing on Friday for his
part in the disappearance of $180 millionfrom two investment funds
managed by Trio Capital: Astarra Strategic and ARP Growth. The
court heard how Richard, now remanded in custody, had received $1.3
million in personalpayments for his part in the thefts. His
company, Astarra Asset Management, had received further millions to
keep sucking ininvestors' dollars. Instead of investors, Richard
turned to some old mates, some professional contacts and
somefinancial planners for some kind words. Including his dentist.
Among those setting pen to paper were Peter Wood, Richard's old
flatmate in Manly and the one-time Trio Capital marketing manager.
Wood didn't reminisce about some rather wild-looking parties he and
Richard enjoyed, but spoketo the qualities of Richard he had
observed. Then there was a financial planner from the Wollongong
financial planning business Dominion,Colin Warne, who was prepared
to go on the record about Richard's strenuous help since thefraud
had been uncovered. "I wish to confirm that Mr Richard has already
assisted our clients, providing critical evidencewhich has assisted
the process in recovering some investments," Warne wrote. This is
the same Warne who was found by the NSW Supreme Court in 2004 to
have breached theCorporations Act by operating an unregistered
managed investment scheme. The failed investment scheme involved
raising $4.6 million to buy the Queen Victoria Hospital inthe Blue
Mountains and turn it into a retirement home. The case resulted in
Warne receiving a lifetime ban from managing an investment scheme.
Sadly for investors in Trio Capital, the ban did not stop Warne
from operating as a financialplanner. So Warne met Richard through
Trio Capital and promptly placed large amounts of investors'money
into Astarra Strategic.
Page 11 of 89 2011 Factiva, Inc. All rights reserved.
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Another who put pen to paper for Richard was a second Wollongong
financial planner, RonaldCaines. Caines was eloquent about the help
Richard had given him. "He has shown honesty and integrity and his
ongoing compassion and financial assistance duringan extremely
difficult time for our family will forever be appreciated," Caines
wrote. Caines said Richard "continued to provide loan funds" and
credited Richard with "standing by andhelping your mates during
difficult times". Stirring stuff. However, it is worth remembering
somefacts about the Trio Capital "loan funds" - more than $500,000
- that Richard forwarded so generously to Caines. Back in 2008, the
Australian Securities and Investments Commission grilled Richard
about theloans to Caines under its section 19 powers to
compulsorily interview people. ASIC went on to ban Caines from the
financial planning industry for life, after he advised people
toinvest in Trio Capital without disclosing the loans. In March,
the Administrative Appeals Tribunal overturned the life ban, and
replaced it with a three-year ban. Showing that the gods of
financial services have a wry sense of humour, Caines can start
work asa financial planner again on August 12 - the same day
Richard is due to be sentenced to jail. Another referee sought out
by Richard was Graham Kinder. Kinder made a brief appearance inthe
Trio saga last year when he became a director of financial planner
Wright Global Investments,alongside Wood. ASIC has told the Supreme
Court that Wright Global Investments was one of the vehicles
thatwas owned and controlled by the supposed mastermind of the Trio
Capital fraud, the Hong Kongbusinessman Jack Flader. (There is no
evidence Flader controlled the company at the time ofWood's and
Kinder's involvement.) Another referee was Ron Phipps-Ellis, an
employee with auditing firm BCS whose characterreference confirmed
that the "company's employees had money invested in Astarra [Trio]
and lost10 per cent". Richard's defence bundle, tendered in court
on Friday, showed the sad truths facing a mandestined for jail
time. It disclosed that Richard had sought a recent diagnosis from
a neurologist. In a letter, his defenceteam articulated his
symptoms as: "Double vision, headaches, muscle weakness, neck
aches,numbness or tingling, most often on the face, poor
co-ordination, sudden unco-ordinatedmovements and vertigo". The
diagnosis was inconclusive. And an assessment by a forensic
psychologist, W. John Taylor, spelled out the
none-too-happyrealities of the prison system that Richard faced. He
wrote: "Because of threats that have been made against Mr Richard,
it is likely that anycustodial sentence given to him by the court
will need to be served in protective custody. This isfar more
difficult and restrictive than serving a custodial sentence."
IN i831 : Financial Investments | iinv : Investing/Securities NS
gplan : Urban Planning/Development | nedc : Commentary/Opinion |
ccat : Corporate/Industrial
News | gcat : Political/General News | gpir :
Politics/International Relations | gpol : DomesticPolitics | ncat :
Content Types | nfact : Factiva Filters | nfcpex : FC&E
Executive News Filter
RE austr : Australia | apacz : Asia Pacific | ausnz :
Australia/Oceania PUB Fairfax Media Management Pty Limited AN
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H o w r e g u l a t o r m i s s e d c h a n c e i n T r i o d e
b a c l e
SE BusinessHD How regulator missed chance in Trio debacle BY
Stuart WashingtonWC 655 wordsPD 5 July 2011SN The Sydney Morning
HeraldSC SMHHED FirstPG 1LA EnglishCY 2011 Copyright John Fairfax
Holdings Limited. LP
INVESTMENT A TEAM of regulators raised concerns about fraudulent
hedge funds more than a year before thewhistle was blown on the
biggest superannuation theft in Australia's history.
TDYesterday it was revealed the Australian Prudential Regulation
Authority raised concerns aboutthe fund manager Trio Capital's
valuation of its two hedge funds in August 2008. As a result of its
"prudential review" of the Albury-based fund manager, the
superannuationregulator even unsuccessfully sought further
information about the valuation of the funds. In October 2008 APRA
was told there was no "available valuations" of two offshore hedge
fundsregistered in the Caribbean tax havens, St Lucia and the
British Virgin Islands. APRA took noaction against Trio Capital
until after the scam was exposed in a letter by Bronte Capital
bloggerJohn Hempton in September 2009. In April this year the
federal government awarded superannuation investors $55 million
incompensation for their part in a theft totalling $125 million. A
further $60 million in investors'money is missing, presumed stolen.
The revelation of APRA's 2008 review of Trio Capital was contained
in enforceable undertakingsmade by former directors of Trio with
both APRA and the Australian Securities and InvestmentsCommission.
The former chief executive of Trio Capital, Rex Phillpott, has been
barred from a role in financialservices for 15 years. A former
non-executive director of Trio, Natasha Beck, has been barred from
a role insuperannuation for four years and financial services for
two years. The actions against the directors of Trio Capital follow
the charging of Trio's former investmentmanager, Shawn Richard, on
two counts of dishonest conduct in relation to misappropriating
$6.4million. The undertakings signed by the directors reveal ASIC's
concerns that each director breachedseveral sections of the
Corporations Act. The documents show Trio's board held concerns
about its hedge fund investments as early as2006, including
failures to honour requests for the return of investors' money and
difficulties inobtaining accurate valuations. Mr Phillpott was
revealed as being intimately involved in the investments into
offshore hedgefunds, without being aware of the valuation methods
used to value the funds. Mr Phillpott was also instrumental in the
2009 transfer of $50 million in one of Trio's hedge funds,the
Exploration Fund, into its successor hedge fund, Astarra Strategic.
He did this "notwithstanding that he was aware of liquidity
problems with the Exploration Fund andconcerns about the lack of
information being provided by the Exploration Fund". BusinessDay
has previously revealed that the fund was run by a Philippines
stockbroker with along history of stock fraud, Frank Richard
Bell.
Page 13 of 89 2011 Factiva, Inc. All rights reserved.
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As the Trio saga unfolded, it became clear regulators had
regular brushes with the fund. For example, in 2005 APRA forced
Shawn Richard off the board of Trio Capital in 2005 becauseof
conflict-of-interest concerns arising from his roles as both owner
and investment manager forthe fund. In 2006 APRA had direct
involvement with another Trio fund, ARP Growth, forcing it outside
thesuperannuation entities it regulates. In 2008 ASIC interviewed
Richard under its compulsory examination powers about a
$500,000secret payment from Trio and Trio-related companies to a
financial planner. APRA would make no comment on its investigations
yesterday. ROAD TO COLLAPSE 2003 Trio Capital set up by Shawn
Richard, pictured. 2006 Trio board documents concerns about
valuations inside hedge fund. August 2008 APRA raises concerns
about valuations of two hedge funds. October 2008 APRA told by Trio
there were no "available valuations". September 2009 Bronte Capital
blogger John Hempton writes to ASIC. October 2009 APRA and ASIC
launch investigations into Trio. December 2009 All Trio funds
frozen by the regulators. December 2010 Shawn Richard pleads guilty
to dishonest conduct. July 2011 Directors Rex Phillpott and Natasha
Beck receive bans from financial services.
IN ihedge : Hedge Funds | i831 : Financial Investments | i81502
: Trusts/Funds/Financial Vehicles |ialtinv : Alternative
Investments | iinv : Investing/Securities
NS c131 : Regulatory Bodies | npag : Page-One Story | c13 :
Regulation/Government Policy | ccat :
Corporate/Industrial News | ncat : Content Types | nfact :
Factiva Filters | nfcpin : FC&E IndustryNews Filter | reqris :
Editor's Choice - Investing/Securities | redit : Selection of
TopStories/Trends/Analysis | reqr : Editor's Choice - Industry
Trends/Analysis
RE austr : Australia | apacz : Asia Pacific | ausnz :
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T r i o C E O a c c e p t s a 1 5 - y e a r b a n f r o m A S I
C
SE FinanceHD Trio CEO accepts a 15-year ban from ASIC BY ANDREW
MAINWC 401 wordsPD 5 July 2011SN The AustralianSC AUSTLNED 2 -
All-round FirstPG 21LA EnglishCY Copyright 2011 News Ltd. All
Rights Reserved LP
REGULATION: Trio Capital chief executive Rex Phillpott -- a
former assistant commissioner at theAustralian Taxation Office --
has agreed to a 15-year ban from acting as a director or working
inany role in the financial services industry. Mr Phillpott, from
Albury in NSW, was appointed CEO of Trio Capital in October 2005,
but it wentinto administration in December 2009.
TDThe Australian Securities and Investments Commission also
revealed yesterday that NatashaBeck, from Bronte in Sydney, who
joined Trio Capital as a non-executive director in 2008,
hadaccepted a two-year banning order, with an exemption for her
personal company, Rumi Holdings,of which she is the sole director
and sole shareholder. Both orders were enforceable undertakings,
which usually signal the end of a formal investigationand remove
the threat of stronger legal action. Albury-based Trio was the
responsible entity for 25 managed investment funds, including
AstarraStrategic. It reportedly had assets of $125 million in
December 2009, but in April last year the NSWSupreme Court ordered
that it be wound up. Much of the money appears to have been
invested inCaribbean hedge funds and other unsuitable asset
categories offshore, leaving thousands ofsuperannuants
significantly out of pocket. The liquidator of Trio Capital has
reportedly beenunable to recover most of the money invested in the
fund. ASIC is understood to be very keen to talk to US-born lawyer
Jack Flader, a resident of HongKong, about Astarra Strategic's
investments, but so far he has shown no desire to visit
Australiaand he has not been charged with any offence here. In
April, the federal government rescued 5358 members of
APRA-regulated super funds with a$55m , 100c in the dollar package.
However, the 365 holders of about $120m of Trio Capital funds in
administration, such as Astarraand ARP Growth, have their own
self-managed superannuation funds and have received norestitution
so far. Their funds are not regulated by the Australian Prudential
Regulation Authority, and as FinancialServices Minister Bill
Shorten has stated, they are responsible for their own choices.
Canadian citizen Shawn Richard, the former investment director of
Astarra Strategic, recentlypleaded guilty in Sydney to two charges
of dishonesty in relation to that role and he is facing a
jailsentence when he comes up for sentence shortly.
CO autaxo : Australian Taxation Office NS c411 : Management
Moves | cslmc : Senior Level Management | c41 : Management Issues |
ccat :
Corporate/Industrial News | ncat : Content Types | nfact :
Factiva Filters | nfcpex : FC&EExecutive News Filter | nfcpin :
FC&E Industry News Filter
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' R a i s e d c o n c e r n ' o n h e d g e f u n d s
SE BusinessHD 'Raised concern' on hedge funds BY STUART
WASHINGTONWC 556 wordsPD 5 July 2011SN The AgeSC AGEEED First
Drop-inPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings
Limited. LP
A TEAM of regulators raised concerns about fraudulent hedge
funds more than a year before thewhistle was blown on the biggest
superannuation theft in Australia's history. Yesterday it was
revealed that the Australian Prudential Regulation Authority raised
concernsabout the fund manager Trio Capital's valuation of its two
hedge funds in August 2008.
TDAs a result of its "prudential review" of the Albury-based
fund manager, the superannuationregulator unsuccessfully sought
further information about the valuation of the funds. In October
2008, APRA was told there were no "available valuations" of two
offshore hedge fundsregistered in the obscure Caribbean tax havens,
St Lucia and the British Virgin Islands. APRA took no action
against Trio Capital until after the scam was exposed in a letter
by BronteCapital blogger John Hempton in September 2009. In April
this year, the federal government awarded superannuation investors
$55 million incompensation for their part in a theft totalling $125
million. A further $60 million in investors'money is missing,
presumed stolen. The revelation of APRA's 2008 review of Trio
Capital was contained in enforceable undertakingsmade by former
directors of Trio with both APRA and the Australian Securities and
InvestmentsCommission. The former chief executive of Trio Capital,
Rex Phillpott, has been barred from a role in financialservices for
15 years. A former non-executive director of Trio, Natasha Beck,
has been barred from a role insuperannuation for four years and
financial services for two years. The actions against the directors
of Trio Capital follow the charging of Trio's former
investmentmanager, Shawn Richard, on two counts of dishonest
conduct in relation to misappropriating $6.4million. The
undertakings signed by the directors reveal ASIC's concerns that
each directorbreached several sections of the Corporations Act. The
documents show Trio's board held concerns about its hedge fund
investments as early as2006, including failures to honour requests
for the return of investors' money and difficulties inobtaining
accurate valuations. Mr Phillpott was revealed as being intimately
involved in the investments into offshore hedgefunds, without being
aware of the valuation methods used to value the funds. Mr
Phillpott was alsoinstrumental in the 2009 transfer of $50 million
in one of Trio's hedge funds, the Exploration Fund,into its
successor hedge fund, Astarra Strategic. He did this
"notwithstanding that he was aware ofliquidity problems with the
Exploration Fund and concerns about the lack of information
beingprovided by the Exploration Fund". BusinessDay has previously
revealed that the Exploration Fund was run by a
Philippinesstockbroker with a long history of stock fraud, Frank
Richard Bell. As the Trio saga unfolded, it became clear regulators
had regular brushes with the fund. Forexample, in 2005 APRA forced
Richard off the board of Trio Capital in 2005 because of
conflict-of-interest concerns arising from his roles as both owner
and investment manager for the fund. In
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2006, APRA had direct involvement with another Trio fund, ARP
Growth, forcing it outside thesuperannuation entities it regulates.
In 2008 ASIC interviewed Richard under its compulsory examination
powers about a $500,000secret payment from Trio and Trio-related
companies to a financial planner. APRA would make no comment
yesterday.
CO aupra : Australian Prudential Regulation Authority IN i81502
: Trusts/Funds/Financial Vehicles | i831 : Financial Investments |
ihedge : Hedge Funds |
ialtinv : Alternative Investments | iinv : Investing/Securities
NS c171 : Share Capital | c17 : Funding/Capital | cactio :
Corporate Actions | ccat :
Corporate/Industrial News | ncat : Content Types | nfact :
Factiva Filters | nfcpin : FC&E IndustryNews Filter
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P a r l i a m e n t t o p r o b e T r i o C a p i t a l f r a u
d c l a i m s
SE BusinessHD Parliament to probe Trio Capital fraud claims BY
Stuart WashingtonWC 314 wordsPD 2 July 2011SN The Sydney Morning
HeraldSC SMHHED FirstPG 4LA EnglishCY 2011 Copyright John Fairfax
Holdings Limited. LP
FUNDS THE loss of about $180 million invested in Trio Capital
and the lack of compensation for self-managed superannuation
investors will be investigated by a federal parliamentary
inquiry.
TDThe inquiry into the Albury fund manager will examine losses
from two Trio funds, AstarraStrategic and ARP Growth, with terms of
reference that include inquiring into the implications
ofinternational fraud. The chairman of the federal parliament's
joint committee on corporations and financial services,Bernie
Ripoll, said the inquiry would examine systemic issues arising from
the collapse. "The collapse of Trio is quite significant and it's
got some unique parts to it which I think need aseparate inquiry;
particularly, we mention the self-managed super funds and
international fraud,"Mr Ripoll said. More than 10,000 investors had
$426 million in funds frozen after the Australian Securities
andInvestments Commission was first alerted to a fraud affecting
Astarra Strategic in 2009. It lateremerged that $125 million
invested in Astarra Strategic had disappeared through a British
VirginIslands company into a network of offshore funds controlled
by a Hong Kong businessman, JackFlader. A further $60 million was
invested through ARP Growth, with no money yet recovered. Earlier
this year, investors in Astarra Strategic through superannuation
funds regulated by theAustralian Prudential Regulation Authority
received $55 million in compensation for fraud underpart 23 of the
Superannuation Industry (Supervision) Act. However, self-managed
superannuation investors in Astarra Strategic were not eligible for
anycompensation. The inquiry will examine issues related to the
collapse, including the lack of any compensation forinvestors in
self-managed superannuation, where the investment products or
advice had failedand the role of research houses who examined the
products. Submissions are due by August 19 and the committee will
report by November 24.
NS gfraud : Fraud | gcat : Political/General News | gcrim :
Crime/Courts | gfinc : Financial Crime | ncat: Content Types |
nfact : Factiva Filters | nfcpex : FC&E Executive News
Filter
RE austr : Australia | apacz : Asia Pacific | ausnz :
Australia/Oceania PUB Fairfax Media Management Pty Limited AN
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D I Y f u n d s n e e d c o m p e n s a t i o n t o o
SE BusinessHD DIY funds need compensation too BY STUART
WASHINGTONWC 895 wordsPD 6 June 2011SN The Sydney Morning HeraldSC
SMHHED FirstPG 9LA EnglishCY 2011 Copyright John Fairfax Holdings
Limited. LP
Australia has a compensation system for investors that leaves
many of them out in the cold whenthe worst happens. The situation
may be about to change, which should be welcome news
forself-managed super fund investors. Do-it-yourself super
investors now account for about a third of Australia's
superannuationinvestments, with more than $400 billion invested.
Those DIY super investors should be wellaware of the worst case
they face after the federal government's compensation for fraud
withinTrio Capital.
TDInvestors in Trio Capital through super funds regulated by the
Australian Prudential RegulationAuthority received $55 million in
compensation - or 100 in the dollar. Investors through DIY
superfunds received nothing. The federal government will shortly
receive a final report from Richard St John, who has beenasked to
consider the need for a broader compensation scheme, and examine
the costs andbenefits. In all likelihood, St John's report will
recommend a broadly-based compensation fund for all
retailinvestors. Such a recommendation will mark an historic step
from an investor compensationregime largely reliant on professional
indemnity insurance to one of a fund supported by
industrycontributions. There will be a certain level of harrumphing
about the moral hazard such a fund would create. Theterm "moral
hazard" is used to describe a situation in which the introduction
of a catch-all safetynet becomes an excuse for lax behaviour by
either investors or financial services providers. Such arguments
have merit. No one (except the recipient) wants a compensation fund
thatrewards investors for stupidity and greed. However, as is the
way of things, "moral hazard" arguments are likely to be advanced
most loudlyby those who face the highest bill from introducing such
a compensation fund. And with the Financial Ombudsman Service
putting before St John a proposal for a broadly-basedcompensation
fund, the costs are not small. The FOS estimates costs would be
capped at 1 percent of revenues for participants across the
financial services industry. Indeed, the harrumphing has started
already. In the Stockbrokers Association's submission to StJohn, it
recommends he take into account the broking industry's "excellent
record in relation toclient complaints and award recovery". "To do
otherwise would be to introduce the risk of moral hazard, and will
encourage less ethicaloperators, putting consumers at risk," it
says. Leaving aside the intricacies of introducing such a
compensation fund - and there are many - it is worth emphasising
the real need for change spelt out in the submissions. The FOS puts
it in simple terms: there are many occasions when investors are
left withoutanywhere to turn to, despite considerable wrongdoing.
The FOS and the Australian Securities andInvestments Commission say
professional indemnity insurance, taken out by financial
servicesproviders to ensure they can meet compensation claims, does
not serve its purpose. "Over an extended period, [the] FOS has
witnessed examples of retail consumers who receive
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[compensation] awards in their favour which have subsequently
not been paid because of thedisappearance or insolvency of a
licensee [and] fraud," the FOS says. "Losses have occurred when
consumers have been induced to invest in financial instrumentswhich
they don't understand and where the advice has been inappropriate
for their needs." The consequences of the present situation are
spelt out by the Association of ARP Unit Holders, asub-set of Trio
Capital investors, in a submission to St John. These investors have
foundthemselves outside any meaningful compensation mechanism from
either their authorisedrepresentative (PST Management) or the
financial services licensee (Wright Global Investments).
"Professional indemnity insurance as a means to compensate
complainants has failed the case ofARP Growth Fund members," the
submission states. "For example, PST Management Pty Ltd[holds]
professional indemnity cover of $5 million, which is less than 10
per cent of the assets'lost'. Wright Global Investments Pty Ltd
holds a similar amount of professional indemnity cover. "Putting
aside the difficulty and legal expense of recovering under such a
policy, the quantumavailable means that no substantive level of
compensation for loss is possible, even if a legalaction is
successful. "This situation is made more difficult by the tendency
of groups caught up in these situations to gointo liquidation, as
has now happened not only with Trio Capital but also PST Management
andWright Global." The submission further spells out the
ridiculousness of relying on professional indemnityinsurance when
all the main players fall over and the insurance contracts are
cancelled. "In the case of ARP Growth Fund unit holders, great
uncertainty as to what exactly washappening with unit holder funds
existed for many months and was not clarified until well after
theprofessional indemnity cover was no longer in place," the
submission says. "There was noopportunity to even lodge claims at
this point, should a unit holder have wished to do so." The
predominantly elderly investors in ARP Growth have lost their
superannuation savings andhave no recourse to any meaningful
compensation. The existing system has comprehensivelyfailed them.
Such a situation should not be allowed to happen again. Historic
steps likely to be contained in St John's report should be embraced
by the federalgovernment, no matter how much harrumphing comes from
the financial services industry.
RE austr : Australia | apacz : Asia Pacific | ausnz :
Australia/Oceania PUB Fairfax Media Management Pty Limited AN
Document SMHH000020110605e7660001p
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C o l d c o m f o r t f o r f o r g o t t e n v i c t i m s o f
T r i o C a p i t a l f i a s c o
SE BusinessHD Cold comfort for forgotten victims of Trio Capital
fiasco BY Stuart WashingtonWC 318 wordsPD 1 June 2011SN The Sydney
Morning HeraldSC SMHHED FirstPG 8LA EnglishCY 2011 Copyright John
Fairfax Holdings Limited. LP
SUPERANNUATION THEY are generally broke, one in five have had to
sell their homes as a result of their losses, andalmost two-thirds
are older than 65. And yet they fight on.
TDYesterday more than 40 unitholders of ARP Growth, a
practically forgotten fund in the TrioCapital collapse, met at the
Norths Leagues Club. They have weathered many knocks since
earlylast year, when it became clear their $54 million in
investments may have vanished into acomplicated overseas structure.
The investors were still coming to grips with the cruellest cut:
their self-managed super fundinvestments are not eligible for any
compensation, even if fraud is proven. Some Trio Capital
superannuation investors are eligible for a shareof $55 million in
compensationannounced last month, because they were regulated by
the Australian Prudential RegulationAuthority. The meeting heard it
was no good taking action against Paul Gresham, the man who put
investorsinto the fund in the first place. Mr Gresham's business,
PST Management, is bust. There are still no clear answers about
what happened to their money. Ron Thornton, president ofthe
association formed by embattled investors, told of how the
Australian Securities andInvestments Commission was not even
investigating the matter until it was prodded late last year. Nor
was the liquidator, PPB, of a mind to take action because there
were no assets to liquidate topay for an investigation. "The thing
was going to die on the vine," he said. "Nothing was going
tohappen." The association hopes it will find out the truth about a
JPMorgan swap, at present being liquidatedin the British Virgin
Islands. The complicated financial product, initially signed with
Bear Stearns,was the chief asset of sub funds dubbed Pythagoras and
Archimedes. What lies behind thesefunds is a mystery.
PUB Fairfax Media Management Pty Limited AN Document
SMHH000020110531e7610003z
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M o v e t o c o m p e n s a t e i n v e s t o r s f o r b a d f
i n a n c i a l a d v i c e
SE FinanceHD Move to compensate investors for bad financial
advice BY Andrew MainWC 616 wordsPD 20 May 2011SN The AustralianSC
AUSTLNED 1 - All-round CountryPG 19LA EnglishCY Copyright 2011 News
Ltd. All Rights Reserved LP
PRESSURE is likely to increase on the federal government to
introduce a statutory compensationscheme for seriously affected
private investors after a study found the social impact of
majorfinancial loss was sometimes ``catastrophic''. The study, by
an independent market research company commissioned by the
AustralianSecurities & Investments Commission, found that
losses by some investors were so significantthat ``their life will
never be the same''. Some felt prolonged anger, uncertainty, worry
anddepression.
TDThe study's findings came from an original sample of more than
9000 people who had invested ina range of financial products and
who complained widely that when schemes failed, financialplanners
provided them with very little information and in many cases
refused to take or returnphone calls. They were also largely
unaware of existing avenues for compensation. ASIC commissioned the
study to better understand the personal consequences of investors
notbeing fully compensated and to help inform submissions to the
government review into whether astatutory compensation scheme
should be introduced in Australia. Among key findings were that
investors who suffered the most had invested all their money,
hadnot diversified or went into debt as part of their investment
strategy. Most investors' losses were associated with an underlying
product that was either frozen orcollapsed, and the impact of the
monetary loss was immediate on investors who did not have
afinancial buffer. For others, the first six months from when they
discovered their loss were critical. Last month, the government
released a consultation paper written by Richard St John, a
formergeneral counsel at BHP and the man who ran the HIH royal
commission in 2002, whichcanvassed the idea of a British-style levy
on financial service providers to compensate retailinvestors
significantly affected by bad financial advice, mismanagement or
dishonesty. The parliamentary joint committee on corporations and
financial services recommended inFebruary 2009 that a report of the
type provided by Mr St John should be commissioned. It focuses on
bad financial advice and there has never been a blanket proposal to
rescue peoplewho have made bad investments, unadvised, on their own
account. The new report, commissioned by ASIC's consumer advisory
panel and carried out by Susan BellResearch of Sydney, notes that
the government is already shouldering the burden of
helpingpreviously self-funded retirees because they are now
receiving government pensions ``andbecause of the physical and
mental health problems suffered by investors who have no
medicalinsurance''. Every single investor in the worst affected
category, which Continued on Page 24 Continued from Page 19 usually
involved losing their house, reported serious illness following the
financial loss.
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Any notion of compensation is complex because deferent types of
investment are regulated indifferent ways. For example, different
categories of superannuation are covered by different levelsof
compensation safety net. Some 70 self-managed super fund investors
who lost about $50 million in a Trio/Astarra-relatedfund called ARP
Growth have not been financially rescued in any way, while
superannuantswithin conventional APRA-licensed superannuation
schemes were almost fully compensated lastyear after a $55m fraud
in Trio Capital, a related company. The worst-affected investors
covered by the new study were in the following types of
scheme:inner city unit developments, mortgage investment schemes,
rural managed investment schemessuch as forestry or horticulture,
structured investment such as hedge funds and infrastructurefunds,
and investors who geared up against their home equity and took out
margin loans to investin assets which lost value. The survey ran
in-depth interviews with a sample of 29 investors after an initial
questionnaire.
CO ausic : Australian Securities and Investments Commission NS
gcat : Political/General News RE austr : Australia | apacz : Asia
Pacific | ausnz : Australia/Oceania PUB News Ltd. AN Document
AUSTLN0020110519e75k0005f
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I n v e s t o r s d e s e r v e a s o f t e r l a n d i n g t h
a n c o n c r e t e
SE Business - Opinion & AnalysisHD Investors deserve a
softer landing than concrete BY STUART WASHINGTONWC 608 wordsPD 25
April 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 5LA
EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP
Investors who use misbehaving financial planners have a
compensation safety net that is morelike landing on concrete. As a
case in point, some investors have put their case to the
FinancialOmbudsman Service and been found to have been wronged. But
then nothing. No compensation because their financial planners have
become insolvent.
TDIf you think of a safety net, these people have bounced right
off and landed on the concrete. The situation arises because the
present system relies on financial planners taking out insuranceto
cover them if they are subject to compensation claims. But at its
worst the system leaves investors fighting an insurance company as
they seekcompensation for wrongdoing by their financial planner.
Sometimes a planner simply does not have the financial capacity to
meet the claims that arebeing made, and the insurance does not
provide a backup. For example, a planner's insurance generally does
not cover fraud. Also, a planner's insurance scheme does not cover
amounts above $20 million. Nor does it offervery effective cover
when a financial planner becomes insolvent. If a financial planner
goes bust, they generally have to notify their insurers. Often an
insurer, onhearing this news, will cancel the planner's policy
within 30 days. Of course, if there is no insurance policy it is
pretty hard for the liquidator to lodge a claim againstthat
insurance. And an insolvent financial planner, by definition, does
not have much money tothrow around. About 70 investors with about
$50 million invested in a fund called ARP Growth know these
factsonly too well. These investors have no realistic recourse to
compensation because the fund isinsolvent, as are the advisers. The
problem is broader. Among 78 ombudsman claims where planners were
insolvent, a total of$4.6 million in compensation was awarded but
only $2.7 million was paid. These failings have been aired in a
consultation paper on the issue of whether there should be aformal
statutory compensation fund for retail investors by Richard St
John. As St John notes in his paper, handed to the Assistant
Treasurer, Bill Shorten, last week: "ASIC isalso of the view that
there are inherent limitations on the effectiveness of professional
indemnityinsurance as a compensation mechanism for retail investors
who suffer loss." With St John's report, investors stand at a
crossroads for this manifestly malfunctioningcompensation system.
There is a real opportunity for the federal government to put in
place a system that avoidsinvestors running the gamut of taking on
an insurance company. It would also offer a neat patch for the
problems facing self-managed super fund investors, whohave $400
billion of investments at stake but no workable compensation
system. This problem
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was exposed when mainstream fund investors received government
compensation of $55 millionfor the fraud in Trio Capital, but
self-managed super fund investors, including the ARP
Growthinvestors, received nothing. The seeds of an effective system
are contained in St John's paper, detailing a report made by
theforerunner to the Companies and Markets Advisory Committee 10
years ago. It recommended a statutory compensation fund that was
operated by an independentorganisation, covered mum-and-dad
clients, and was funded by an industry levy. The alternative,
adopted by the Coalition government in December 2003 and finally
put in place in2008, was to rely on planners taking out insurance.
It hasn't worked. Now there is a fresh opportunity for a safety net
that performs better than landingon concrete.
CO ombud : Financial Ombudsman Service NS gplan : Urban
Planning/Development | nedc : Commentary/Opinion | gcat :
Political/General News
| gpir : Politics/International Relations | gpol : Domestic
Politics | ncat : Content Types | nfact :Factiva Filters | nfcpex :
FC&E Executive News Filter
RE austr : Australia | apacz : Asia Pacific Countries/Regions |
ausnz : Australia and New Zealand PUB Fairfax Media Management Pty
Limited AN Document SMHH000020110424e74p0001j
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C o u p l e o f c l o w n s d u p e d i n s u p e r s c a m m u
d d y w a t e r s f o r t r u e v i c t i m s
SE Business - Opinion & AnalysisHD Couple of clowns duped in
super scam muddy waters for true victims BY STUART WASHINGTONWC 759
wordsPD 16 April 2011SN The Sydney Morning HeraldSC SMHHED FirstPG
6LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP
The clowns came out to play when the federal government shelled
out $55 million incompensation for certain investors in Trio
Capital. The clowns include the former Wollongong financial planner
Ross Tarrant, on the front page of arival newspaper this week
moaning about how DIY super investors should be paid
compensation.
TDAnd that bloke Peter Johnston, the head of the Association of
Independently Owned FinancialPlanners, was out there whingeing
about the same thing. Really, who are these jokers? How anyone
could quote them with a straight face is beyond me.They have zero
credibility on the issue of Trio Capital. The fact they are
presenting themselves aspart of the solution is staggering; they
were part of the problem. Worse, they are muddying thewaters for
DIY super investors who have what appear to be genuine claims for
compensation. A quick recap: Trio Capital, a fund manager in
Albury, was seized by regulators in December2009. It has now been
revealed to have been operating a big fraud in two particular hedge
funds itmanaged: Astarra Strategic and ARP Growth. On Wednesday the
Assistant Treasurer, Bill Shorten, said government compensation
would cover5000 members of super funds overseen by the Australian
Prudential Regulation Authority withmoney in Astarra Strategic. All
up, they will be paid $55 million. But 295 self-managed super fund
investors in Astarra Strategic and 70 investors in ARP Growthwere
essentially told to nick off. Collectively, along with some direct
investors who are not beingcompensated, these investors lost up to
$120 million. Now, this should be a big warning bell for the
self-managed super investors that account for $420billion in
Australia's booming $1.3 trillion superannuation industry. It's a
bell these pages have been ringing for a while. As we wrote here
last April, people beingushered into DIY super should receive
documents with large red letters on the front reading: "Youcould
lose the lot." My position is not a Ross Tarrant-style pitch for
broad-based compensation for DIY super fundinvestors. For example,
I wouldn't include him in any compensation scheme. Additionally,
there are good reasons for the government's current position to let
people in DIYsuper look after themselves. The current setting, as
played out in Trio Capital, is that governmentcompensation looks
after mainstream investors in funds regulated by the Australian
PrudentialRegulation Authority. I am alive to arguments of moral
hazard that a broad-based compensation scheme for DIY supercould
create. I am also alive to the ridiculous situation of bailing out
a DIY super husband in acase against a DIY super wife. The reason I
am sympathetic to the Astarra Strategic and ARP Growth DIY super
investors isthey found themselves in a managed investment scheme
where a fraud was perpetrated. Theyentered those schemes on the
advice of a trusted adviser. That trusted adviser failed them,
oftenwith a flurry of associated fees. So, when Shorten considers
the merits of broadly based compensation for investors, I
believethere are grounds for a limited compensation scheme for DIY
super investors.
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At the same time, many problems will be addressed by forthcoming
financial advice reforms thatremove conflicted remuneration
received by planners. That brings me neatly back to Ross Tarrant.
His business, Tarrants, received $840,000 from TrioCapital in
commissions termed a "marketing allowance". That same "marketing
allowance" waspaid as about 200 Tarrants clients set up DIY super
funds that invested $20 million in AstarraStrategic. And Tarrant
reckons he deserves compensation? It is beyond audacious. Then
there's Peter Johnston. Johnston's members in the association,
including Tarrants,Dominion and Seagrims, were wildly
overrepresented in the fallout of Trio Capital. Johnston is the
clown who squired around Shawn Richard - also known as Shawny Cash-
proclaiming his innocence early last year. Shawny ended up being
the front man for the HongKong mastermind of the scam, and now
faces a lengthy jail term. I am uncomfortable about the large
number of association members who found themselvesinvesting money
in the Trio Capital scam. I am uncomfortable about the
credulousness of theassociation's leader. Shorten's reforms promise
to make it more difficult for Trio Capital to happen again, and
keepsome of the clowns at bay. But there should also be
consideration of compensation for DIY superinvestors sucked in by
the clowns.
CO aupra : Australian Prudential Regulation Authority IN i831 :
Financial Investments | iinv : Investing/Securities NS gdiy : DIY |
nedc : Commentary/Opinion | ccat : Corporate/Industrial News | gcat
:
Political/General News | ghimp : Home Improvements | glife :
Living/Lifestyle | greest : RealEstate/Property | ncat : Content
Types | nfact : Factiva Filters | nfcpex : FC&E Executive
NewsFilter
RE austr : Australia | apacz : Asia Pacific Countries/Regions |
ausnz : Australia and New Zealand PUB Fairfax Media Management Pty
Limited AN Document SMHH000020110415e74g0006j
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L a r g e s t g o v e r n m e n t p a y o u t o f $ 5 5 m f o r
T r i o s u p e r f r a u d
SE BusinessHD Largest government payout of $55m for Trio super
fraud BY STUART WASHINGTONWC 554 wordsPD 13 April 2011SN The AgeSC
AGEEED SecondPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings
Limited. LP
IN AUSTRALIA'S largest payout for superannuation fraud, the
government yesterday awarded$55 million to investors who lost money
in Albury fund manager Trio Capital. The compensation will return
100 in the dollar to more than 5000 investors, many of
themretirees.
TDThe move was portrayed by Assistant Treasurer Bill Shorten as
vital to shore up confidence in thesuperannuation system. "The idea
that we can eliminate all crooks and thieves and charlatans some
people always tryand take advantage of others," Mr Shorten said.
"What we do know is the regulators seem to becatching some of the
people who have done it; and we will compensate victims who are
victimsthrough no fault of their own." The compensation marks the
end of a tortuous path for some Trio investors after regulators
tookover Trio Capital in December 2009 and froze more than $400
million in investments. It lifts the payout to 100 per cent from
the previous level of 90 per cent when superannuationinvestors in
Commercial Nominees were compensated for losses of $30 million in
2002. But yesterday's compensation measure is limited to 5385
investors in government-regulatedsuperannuation funds, including
more than 2500 in New South Wales. The distinction means
do-it-yourself superannuation investors, among those who lost
another$120 million in two Trio hedge funds, will not be
compensated. These investors include John Telford, 62, a Wollongong
man diagnosed as an incompletequadriplegic who lost his disability
payout of $600,000 in Trio. Mr Telford is among more than 100
clients of a collapsed Wollongong financial planner, Tarrants,who
will not receive a cent because they were invested in DIY super
funds. "It's a hit below the belt considering that nobody pointed
out that there was such a thing as twosuper funds: one with a
guarantee and one with nothing," Mr Telford said yesterday. About
$170 million in Trio's reported losses were concentrated in two
hedge funds, AstarraStrategic and ARP Growth. "Money was directed
into hedge funds in the Caribbean; there is little evidence
investments weremade or, if they were, if they have any value," Mr
Shorten said. The former investment manager for Trio Capital, Shawn
Richard, has pleaded guilty to two countsof dishonest conduct in
relation to Astarra Strategic and faces sentencing on May 13. Mr
Shorten said there was no compensation available for
non-superannuation investors whoplaced their money directly into
troubled funds. He also said investors in DIY super funds were
ineligible for compensation on the basis these
Page 29 of 89 2011 Factiva, Inc. All rights reserved.
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investors were taking responsibility for their own investments.
Asked whether DIY super investors, who account for a third of the
$1.3 trillion in Australiansuperannuation savings were aware of
their lack of a safety net, Mr Shorten said: "I would saythey are
going to become a lot more aware." He said a report commissioned by
the federal government about extending a fraud compensationscheme
to all investors was due by June 30. Rosemary Walker, 73, welcomed
the decision that will return money to her and 250 fellow low-paid
Tabcorp workers who had superannuation in Astarra Superannuation
Plan. Ms Walker said the uncertainty had taken its toll on her
colleagues' health.
IN i831 : Financial Investments | iinv : Investing/Securities NS
gcrim : Crime/Courts | gcat : Political/General News RE austr :
Australia | apacz : Asia Pacific Countries/Regions | ausnz :
Australia and New Zealand PUB Fairfax Media Management Pty Limited
AN Document AGEE000020110413e74d00003
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D I Y s u p e r f u n d s g i v e n c o l d s h o u l d e r i n
T r i o p a y o u t
SE BusinessHD DIY super funds given cold shoulder in Trio payout
BY Stuart WashingtonWC 537 wordsPD 13 April 2011SN The Sydney
Morning HeraldSC SMHHED FirstPG 8LA EnglishCY 2011 Copyright John
Fairfax Holdings Limited. LP
SUPERANNUATION THE stark difference between regulated super
funds and self-managed super funds in the case offraud was made
clear yesterday when the first set received $55 million in
governmentcompensation.
TDThe second set, suffering losses of about $120 million, will
receive nothing. The Assistant Treasurer, Bill Shorten, signalled a
forthcoming review of a compensation schemefor all investors
yesterday, which is due by June 30. Yesterday's outcome highlights
wildly different compensation regimes for people caught up in
theimbroglio of Trio Capital, an out-of-control Albury fund manager
that allowed two hedge funds torip off investors. In September 2009
the whistle was first blown on Trio Capital when the Bronte Capital
bloggerJohn Hempton contacted authorities with suspicions prompted
by magically even returns in a Triohedge fund called Astarra
Strategic. By December both the Australian Securities and
Investments Commission and the AustralianPrudential Regulation
Authority had stepped in and the massive untangling job began. What
eventually emerged was a tale of global fraud involving a bunch of
international penny stockscammers. Using elaborate corporate
structures in exotic Caribbean tax havens, Astarra Strategic
spiritedaway about $125 million, with ASIC eventually finding a
lawyer based in Hong Kong, Jack Flader,playing an instrumental
role. As the digging continued, 70 investors in a second Trio hedge
fund, ARP Growth, were found tohave suffered losses of more than
$50 million. Mr Flader's local henchman, Shawn Richard, faces
sentencing on May 13 after pleading to twocounts of dishonest
conduct. The effect on investors has been devastating. First,
whether it was good money or bad, regulatorslocked up all money -
more than $400 million - that was locked inside Trio Capital. It
was only gradually that funds were awarded to new managers and
investors could startretrieving some money as ACT Super, for super
fund investors, and the liquidator PPB, for regularinvestors,
unpicked the mess. ACT Super made the application for compensation
for super fund investors to Mr Shorten lastOctober. The
compensation is available under part 23 of the Superannuation
Industry(Supervision) Act, but only to those who invested in Trio
through APRA-regulated funds. It leaves superannuation investors
who had been tipped into Trio through DIY funds, including allthe
investors in ARP Growth, without a cent. The theory is that
trustees of DIY super fundsshould be skilled enough to look after
themselves. Mark McDonald of the lawyers Maguire & McInerney
said 100 clients who went through thefinancial planning firm
Tarrants were all in DIY funds that then invested in Astarra
Strategic.
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"I think it's incredibly exciting for the poor people who have
suffered such a huge amount of lossthrough no fault of their own,"
he said. "The problem is, only some of them are getting sorted
out." It is a view that resonates with John Telford, 62, a
Wollongong pensioner who was a client ofTarrants and lost a
$600,000 disability payout. "I'm one of those out in the cold
because of the way the financial planner invested my money, thatI
wasn't savvy to," he said.
IN i835 : Legal Services | ibcs : Business/Consumer Services NS
gdiy : DIY | gcat : Political/General News | ghimp : Home
Improvements | glife : Living/Lifestyle |
greest : Real Estate/Property RE austr : Australia | apacz :
Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
PUB Fairfax Media Management Pty Limited AN Document
SMHH000020110412e74d0004i
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S u p e r b a i l o u t e x c l u d e s D I Y i n v e s t o r
s
SE LocalHD Super bailout excludes DIY investors BY SIOBHAIN
RYAN, ADDITIONAL REPORTING: GEOFFREY NEWMANWC 759 wordsPD 13 April
2011SN The AustralianSC AUSTLNED 1 - All-round CountryPG 1LA
EnglishCY Copyright 2011 News Ltd. All Rights Reserved LP
THOUSANDS of superannuation fund members who were defrauded in
the Trio Capital scandalwill have their money returned in the
biggest bailout in the industry's history. But, in announcing the
$55 million rescue, the Gillard government excluded hundreds of
do-it-yourself superannuation fund holders in what will be a
wake-up call to the more than 800,000 self-managed funds in the
country.
TDAssistant Treasurer Bill Shorten yesterday revealed 285 people
who ploughed money into thenow defunct Trio Capital via DIY super,
along with 405 who invested directly, would have norecourse to the
government lifeline. Compensation will be limited to 5358
contributors to mainstream superannuation funds regulatedby the
industry watchdog, the Australian Prudential Regulation Authority.
They will receive back allof the money that was invested in the
Albury-based funds manager, formerly known as Astarra. To explain
the exclusions, Mr Shorten said self-managed superannuation fund
members had ``thebenefit of direct control over where their money
was invested, while the members of other fundsdo not''. ``If people
wish not to operate under those SMSF regulations, they're free to
become members ofthe APRA funds,'' Mr Shorten said. Ross Tarrant,
managing director of Tarrant Financial Consultants, who lost
$500,000 in familysavings as well as $20m of his clients' money in
Trio Capital investments, blasted the governmentdecision to deny
compensation to those who invested through an SMSF. ``ASIC and APRA
licensed and regulated these public offer funds and are now,
whileacknowledging the fraud and compensating some superannuants,
leaving the SMSFs out in thecold,'' he said. ``This was an
opportunity for the government to recognise its shortcomings in
this area andcompensate ordinary Australians for events well beyond
our shores and controls while restoringconfidence to the
superannuation industry and investors generally. ``Unfortunately,
the letter of the law has prevailed and some will receive
compensation and otherswon't.'' For Mr Tarrant, the Trio scandal,
in which money was channelled offshore to a hedge fund in
theCaribbean, has been a double hit. Apart from losing his own
money through an SMSF and a directinvest, his firm was forced into
liquidation, largely due to its loss of reputation over the Trio
Continued on Page 4 Continued from Page 1 Capital collapse. He has
joined a planned class action against insurers for Trio Capital and
itsdirectors as well as the research houses that gave the fund
manager glowing reports. The exclusion of self-managed fundholders
from the compensation provisions of part 23 of theSuperannuation
Industry (Supervision) Act was last reviewed by the Howard
government in 2003and retained by Labor when it took office.
Page 33 of 89 2011 Factiva, Inc. All rights reserved.
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Yesterday's ruling represents the biggest application of the
controversial exclusion, but it comes ata time of exponential
growth in the SMSF sector. DIY super funds now hold almost
one-third ofAustralia's retirement savings -- just under $400
billion of the $1.23 trillion total. Australia's 800,000-plus
SMSFs, which have average assets of $836,000, represent the
fastest-growing segment of the superannuation market, growing 14
per cent in the 2009-10 financial year.The Trio bailout will top
the $49m paid out in all previous compensation bailouts between
2001and 2009. It will be funded via an industry levy of about 2c
per $100 on people with super accounts in APRA-regulated funds. The
Gillard government has commissioned an independent review of the
pros and cons of astatutory compensation scheme for the financial
services sector, with a report due by June 30. Until then, the
courts and the Financial Services Ombudsman are the two avenues
left toinvestors outside the compensation scheme. Ron Willemsen,
principal at law firm Macpherson &Kelley, which is leading the
class action, said many more of his 190 claimants would be
leftempty-handed by the government decision. Many SMSF members are
near the end of their working lives, with 33.7 per cent in the
55-64 agegroup, leaving them particularly vulnerable to capital
losses. Jeremy Cooper, author of the government's review of super,
said those who managed their ownsuperannuation had to accept they
were taking on more risk than those who handed the task to afund
monitored by the APRA. Despite yesterday's bailout, the government
had no comment on how it would deal with a further$59m said to be
missing from another Trio Capital fund, the ARP Growth Fund.
NS gcat : Political/General News RE austr : Australia | apacz :
Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
PUB News Ltd. AN Document AUSTLN0020110412e74d0000q
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O m b u d s m a n ' s n a m e a n d s h a m e l i s t a b o l d
s t e p f o r w a r d
SE Business - Opinion & AnalysisHD Ombudsman's name and
shame list a bold step forward BY STUART WASHINGTONWC 905 wordsPD 7
March 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 9LA
EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP
Hooray for the name-and-shame list released by the Financial
Ombudsman Service! Pleaseforgive the exclamation mark; I don't get
to be jubilant very often in this column. It's usually written with
a harried frown as I spell out some abuse visited upon
investors.
TDLike those poor investors now waiting for an outcome from the
mega-litigation surrounding the $3billion collapse of Storm
Financial. Or those other poor people who had the misfortune to
have theAlbury-based fund manager Trio Capital visited on them. Now
where was I? That's right, I was jubilant. Easy to get sidetracked
sometimes. My reason forjubilation (as I have said, an uncommon
term for this column; I am using it in the dictionary senseof "a
feeling of great happiness") is the FOS's first attempt at a
name-and-shame list rankingcomplaints made against financial
services companies. I would argue this is good for the industry,
good for consumers and even good for companies whoare unwittingly
caught out in the glare of the new level of disclosure. For the
first time, FOS has attempted to publicly rank the complaints it
has received aboutindividual institutions over the six months to
June 30 last year. Following the dictum of sunshine being the best
disinfectant, the lists give the industry and thehardy consumer a
snapshot of who is being most complained about. I say hardy
consumerbecause the FOS lists are definitely a work in progress.
First, you are drowning in data. There are 20 different industry
categories and within eachcategory companies are ranked on up to
nine criteria. Also, on an initial scan some aspects aredownright
confusing. For example, there is a valiant attempt made to rank
each company on acomplaints-for-every-100,000-customers basis. Big
banks like this approach because it puts into perspective large
numbers of complaints thatlarge shops receive and ranks them on a
like-for-like basis with smaller numbers of complaintsthat small
shops receive. The system unfortunately breaks down when some of
the companies that are the subject ofcomplaints do not disclose
their market size to FOS, rendering like-for-like
comparisonsimpossible. The lists then resort to disclosing the
actual number of complaints these recalcitrant companiesreceive,
while ranking the other companies on a complaints for every 100,000
customers basis. Apples and oranges, anyone? The lists also have
the potential to raise more questions than answers. For example, I
have no great insight into why the small Adelaide firm Mark Power
Financial scoresthe highest complaints ranking in the derivatives
and broking category on a complaints for every100,000 customers
basis, at almost 10 times the median ranking. Nor do I know the
reasons why QBE ranks second highest for complaints in sickness
andaccident insurance when it is near or under the median ranking
in most other categories. Then I see that Hollard Insurance Company
is first in the rankings of complaints for home
Page 35 of 89 2011 Factiva, Inc. All rights reserved.
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contents insurance and second in home building insurance and I
start to wonder why. It is the question of "why?" provoked by these
rankings that is good for everyone with an interestin financial
services. After all, the aim of an external disputes resolution
provider like FOS is tohave no work: it wants disputes with
customers to be solved internally. If firms ask themselves why they
are appearing on this list, or they are regularly asked the
samequestion by consumers, media and regulators, there is a strong
impetus for better systems toaddress customer complaints. That is
good for the industry, good for consumers and even good for the
outed companies. So bravo again to FOS for a bold step in the right
direction. Footnote one: The one result in the FOS rankings I don't
ask myself "why" about is RHG, thesuccessor to RAMS Home Loans,
being the highest ranked for complaints in housing finance. As this
paper has reported previously, ever since borrowers got stuck with
RHG after RAMScollapsed they have been charged one of the highest
variable rates in the market. Then RHGcharges large fees to leave
its embrace. Failures in dispute resolution are just another black
mark.I would complain too. Footnote two: On the subject of Trio
Capital, the Assistant Treasurer, Bill Shorten, is stillconsidering
the Trio trustee's application for compensation for super investors
dudded in Trio. The compensation is available, at Shorten's
discretion, under fraud provisions of theSuperannuation Industry
(Supervision) Act, with a potential payout of 90 in the dollar. Of
course, Trio has turned out to be an impressively large fraud, with
$120 million missing from afund called Astarra Strategic and
another $59 million or so missing from a fund called ARP Growth.
The application for super investors in Astarra Strategic was made
to Shorten months ago. When I inquired of his office in October an
answer was expected in the delightfully imprecise"coming weeks". On
Friday the expectation of an answer, after Shorten's office had
flicked it to the AustralianPrudential Regulation Authority, was
within four to six weeks. How long does it take the government to
call a spade a spade? Or, in this case, a fraud a fraud?
CO ombud : Financial Ombudsman Service NS nedc :
Commentary/Opinion | ncat : Content Types | nfact : Factiva Filters
| nfcpex : FC&E
Executive News Filter RE austr : Australia | apacz : Asia
Pacific Countries/Regions | ausnz : Australia and New Zealand PUB
Fairfax Media Management Pty Limited AN Document
SMHH000020110306e7370001r
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N o s a f e t y n e t f o r $ 4 0 0 b n i n D I Y s u p e r
SE BusinessHD No safety net for $400bn in DIY super BY By STUART
WASHINGTONWC 352 wordsPD 14 February 2011SN The AgeSC AGEEED
FirstPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings Limited.
LP
MORE than $400 billion invested in "do-it-yourself"
superannuation funds, representing a third ofAustralian super, has
no compensation safety net in case of fraud, industry experts have
warned. The chief executive of the Association of Super Funds of
Australia, Pauline Vamos, said manyinvestors put money into
self-managed super funds without fully appreciating the risks.
TDInvestors in work-based super schemes covering the majority of
Australians are eligible forcompensation in the case of fraud, at
the discretion of assistant treasurer Bill Shorten. But there is no
such compensation safety net for investors in the rapidly growing
DIY super sector. "The risks are you don't have a lot of those
safety nets, and you have to understand that," MsVamos said. Jeff
Bresnahan, managing director of super fund ratings firm
SuperRatings, said DIY super hadbeen sold by financial advisers and
accountants, leading to the rapid growth. But he said many
investors would not have been told of the lack of compensation when
it came tofraud. Mr Bresnahan said the size of the DIY super pool
would lead to more problems, includingquestionable investments and
catastrophic losses. "It's just going to attract more and more
fraudulent activity," Mr Bresnahan said. Yet the federal government
has no plans to extend the safety net available to mainstream
superfunds to include DIY funds. Under the Superannuation Industry
(Supervision) Act, a trustee of a mainstream super fundregulated by
the Australian Prudential Regulation Authority can apply for
compensation if lossesare due to fraud. The reasoning for excluding
DIY funds from compensation is that DIY trusteestake responsibility
for their investment decisions and should not be bailed out by the
government.The lack of compensation is being challenged by 70 DIY
super investors who lost $50 million inoffshore assets that were
placed through a Trio Capital fund called ARP Growth Fund. Trio
Capital has subsequently been accused of fraud in the case of two
of its funds, ARP Growthand Astarra Strategic.
NS gdiy : DIY | gcat : Political/General News | ghimp : Home
Improvements | glife : Living/Lifestyle |greest : Real
Estate/Property News
RE austr : Australia | apacz : Asia Pacific Countries/Regions |
ausnz : Australia and New Zealand PUB Fairfax Media Management Pty
Limited AN Document AGEE000020110213e72e0002c
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D I Y s u p e r f u n d i n v e s t o r s w a r n e d o f n o c
o m p e n s a t i o n f r o m f r a u d
SE BusinessHD DIY super fund investors warned of no compensation
from fraud BY Stuart WashingtonWC 429 wordsPD 14 February 2011SN
The Sydney Morning HeraldSC SMHHED FirstPG 5LA EnglishCY 2011
Copyright John Fairfax Holdings Limited. LP
PROPERTY- SUPERANNUATION MORE than $400 billion invested in
"do-it-yourself" superannuation funds, representing a third
ofAustralian super, has no compensation safety net in case of
fraud, industry experts have warned.
TDThe chief executive of the Association of Super Funds of
Australia, Pauline Vamos, said manyinvestors put money into
self-managed super funds without fully appreciatingthe risks.
Investors in work-based super schemes covering most Australians are
eligible for compensationinthe case of fraud, at the discretion of
the Assistant Treasurer, BillShorten. But there is no such
compensation safety net for investors in the rapidly-growing DIY
supersector. "The risks are you don't have a lot of those safety
nets, and you have to understand that," MsVamos said. Jeff
Bresnahan, the managing director of the super fund ratings firm
SuperRatings, said DIY superhad been sold by financial advisers and
accountants, leading to its rapid growth, but manyinvestors would
not have been told of the lack of compensation when it comes to
fraud. He said the size of the DIY super pool would lead to more
problems, including questionableinvestments and catastrophic
losses. "It's just going to attract more and more fraudulent
activity," he said. Yet there are no plans by the federal