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Tuesday, 22 February 2011
Page: 1085

Mr FLETCHER (9:50 PM) —I rise to raise a matter which has been put to me by several constituents who have self-managed superannuation funds. Unfortunately, they have fallen victim to conduct by a number of parties which, according to some views, appears to be criminal or fraudulent and, at the very least, negligent or careless. In fact, as there have already been convictions recorded, I think it is not inappropriate to describe the conduct as criminal.

The constituents who have come to see me are in the troubling position whereby they have sought to provide for themselves in their retirement but, due to fraudulent conduct, their retirement savings have effectively either been lost completely or at least been very substantially reduced. I want to speak of one particular sorry story I have heard which concerns the ARP Growth fund, which is part of a stable of products offered by a funds manager, Trio Capital. Regrettably, a financial adviser urged a number of my constituents to switch much or all of the balance of their self-managed superannuation funds into the ARP Growth fund. Let me describe the experience of one constituent. I will not name him, to preserve his privacy, but I will describe some aspects of the experience that he and his family have faced. This constituent had been building up funds in a self-managed superannuation fund for many years. He was a very busy executive, travelling a lot but still taking active steps to provide for his own retirement and ensure that he and his family would not be a burden on the state and on the public purse. In 2004, based upon advice from his financial adviser, he put a very substantial proportion of the balance of his fund into the ARP Growth fund.

In 2007, a company called Astarra Capital became the responsible entity. This company was subsequently renamed Trio Capital. Danger signs presented themselves, statements became less frequent and, by 2009, an administrator had been appointed to Trio Capital, following complaints from a number of people who were concerned about the danger signs that were emerging or who had had dealings with Trio Capital in some way or another. It now appears that the total amount of retirement savings missing in this affair is somewhere between $123 million and $170 million. Some of it may never be recovered.

In the case of the ARP Growth fund, much of the money went to the British Virgin Islands. Recovery action is underway, but there is reason to be very concerned that much, if not all, of the money may not be recovered. Some key rogues were involved: a Mr Shawn Richard, the investment manager of Trio, who has been convicted and will be sentenced in May this year; a Mr Jack Flader, chairman of a Hong Kong company, Global Consultants and Services Ltd, which received substantial amounts of money from Trio; and a Mr Frank Richard Bell, who managed the so-called exploration fund in the West Indies, which received about $75 million from Trio, and who has been the subject of adverse action by US securities industry regulators.

Trio was the responsible entity for quite a number of funds. Some of those were regulated by APRA and have the benefit of a statutory compensation scheme, so underlying members are protected. However, self-managed superannuation funds which invested and which were defrauded do not have the benefit of this scheme and members of those funds are therefore left in the position where they face having very little provision for their retirement when they thought they had been doing the right thing for many years.

I am a supporter of self-managed super funds and I believe it makes good sense for such vehicles to be available to people who wish to manage their superannuation assets directly. I acknowledge that if you choose to manage your retirement funds yourself you must accept the consequences of your actions. But that does not mean I believe—or that any of us should accept—that self-managed super funds should be left as sitting ducks for fraudulent operators. I have pursued this matter with the Australian Securities and Investments Commission and will continue to do so, but I consider that it also raises a question of broader policy issues and deserves continued scrutiny.