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Wednesday, 23 October 2002
Page: 5730

Senator EGGLESTON (3:24 PM) —We are talking about what happens to superannuation fund members who have lost money as a result of mismanagement of the super funds by directors and so on. That is certainly an issue, and one case which specifically comes to mind concerns the activities of Commercial Nominees of Australia Ltd. In that case the people who belonged to the superannuation fund were disadvantaged by the activities of directors. On 14 June the Assistant Treasurer announced that it had been decided to grant financial assistance to certain small superannuation funds formerly under the trusteeship of Commercial Nominees of Australia Ltd. This assistance was to be granted under part 3 of the Superannuation Industry (Supervision) Act 1993 to some 181 small superannuation funds that suffered loss in the Enhanced Cash Management Trust, or ECMT. In other words, these people were being looked after by the Howard government to ensure that their losses were redeemed.

Redemptions from the ECMT were frozen in November 2000 and applications for assistance for these funds were made by Oak Breeze, the replacement trustee, on 7 February 2002. The Assistant Treasurer was satisfied that the 181 small funds suffered eligible losses under the act; that is, that the losses were the result of fraudulent conduct or, in effect, theft, and the public interest required that a grant of assistance was made, and it was done. In this situation the safety net which is in place acted to support the 181 small funds which had suffered losses as a result of the bad management of Commercial Nominees of Australia Ltd.

Finally, with regard to the outstanding applications for financial assistance, the trustee of a superannuation fund can apply for financial assistance through a regulated fund under part 23 of the Superannuation Industry (Supervision) Act 1993 where that fund has suffered an eligible loss. As it happens, some 466 applications have been received for losses under that category. Again, these losses have been redeemed under the system which I have already referred to. The losses which overall related to the ECMT—the Global Bank Account, the Enhanced Income Trust, the Equity Enhanced Fund and the Confidence Investment Trust—came to an estimated total of some $30 million. The ECMT losses accounted for 199 applications with estimated losses in the order of $23.3 million. Determinations were made in relation to 196 of these applications and payment was made to all 196 funds. So the people who had been disadvantaged by the collapse of these funds due to fraud and other kinds of activities, which fell within the requirements for the assistance to be given, had their losses redeemed. This shows that the safety net which is in place has worked to support people in this kind of situation.

The federal government has supported the compulsory superannuation provisions which have been in place for some time now and, certainly with the ageing of Australia, it is necessary that we have an effective and strong superannuation industry and that people have the confidence to believe that their funds are secure. If, due to fraud or criminal mismanagement, the money is lost, then people in these superannuation funds need to know that their losses will be redeemed. (Time expired)

Question agreed to.