Australian Securities and Investments Commission

Mr Fletcher asked:

In respect of the decision in December 2009 by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA) to suspend Trio Capital Ltd as the trustee of a number of superannuation funds, including the ARP Growth Fund, causing the loss to thousand of Australians in their superannuation funds, what actions

a) and investigations are being taken by ASIC and/or APRA in relation to the collapse of these investments, particularly the ARP Growth Fund,

b) are being taken by ASIC and/or APRA to recover lost funds, and what is the status of any such attempts, particularly in relation to the ARP Growth Fund,

c) and investigations are being taken by ASIC and/or APRA in respect of auditors of the various funds, in particular the ARP Growth Fund, including potential prosecutions or civil actions, and

d) and investigations are being taken by ASIC and/or APRA in respect of financial advisers who recommended investment in these funds, in particular in the ARP Growth Fund, including potential prosecutions or civil actions.

Mr Swan responded:

The Australian Prudential Regulation Authority (APRA) suspended the Responsible Superannuation Entity (RSE) licence of Trio Capital Limited (Trio) on 16 December 2009 and appointed an acting trustee to the five superannuation entities previously under Trio’s trusteeship (‘Acting Trustee’). APRA subsequently cancelled Trio’s RSE licence in April 2010.

The Australian Securities and Investment Commission (ASIC) suspended Trio’s Australian Financial Services Licence (AFSL) on 17 December 2009 following the voluntary appointment by Trio of administrators.

ASIC is in the process of cancelling Trio’s AFSL.

The decision to suspend Trio was taken to protect members’ assets and to ensure that members’ assets were in independent hands. The suspensions did not cause loss to the members.

ASIC identified the Astarra Strategic Fund (ASF) as a fund of concern during September 2009 as part of a surveillance of the sector. When ASIC could not get satisfactory answers on the ASF’s overseas investments, ASIC advised APRA and investigations were commenced in October 2009. Those investigations continue and are directed at identifying wrong-doing and the conduct of various parties, including financial advisors and auditors. ASIC’s investigation also includes the ARP Growth Fund, which was a managed investment scheme operated by Trio. At this time it is not possible to make any further comment regarding the recovery of funds, civil action or prosecutions until these investigations are completed, except to note that in October 2010, an application was lodged by the Acting Trustee with the Assistant Treasurer and Minister for Financial Services and Superannuation for financial assistance under Part 23 of the Superannuation Industry (Supervision) Act 1993 (the Application). The Application seeks compensation for the loss suffered by the eligible APRA regulated Trio superannuation entities as a result of fraudulent conduct or theft in connection with ASF. This compensation is not available under existing legislation to self-managed superannuation funds, who are understood to have been the majority investors in the ARP Growth Fund. The Trio superannuation funds regulated by APRA did not invest in the ARP Growth Fund.

The Minister has sought APRA’s advice on the compensation application, as required by legislation.

APRA is currently considering its response to the Minister’s request for advice on the application for compensation. Given the complexity of the application it will take APRA some time to provide a final assessment.