Trustees of self-managed super funds (SMSFs) do have legal options in the event of fraud or theft, despite reports they have been “swimming outside the flags”.
SMSF Professionals’ Association of Australia (SPAA) chief executive Andrea Slattery says SMSF investors have legal recourse available to them should they suffer fraud or loss.
Recently, the Australian Prudential Regulation Authority (APRA) defended its inability to prevent the collapse of Trio Capital, arguing that the investment group’s trustees failed to act in members’ interests.
The regulator emphasised that the fraud did not occur in an APRA-regulated entity, but in an offshore hedge fund, which it contends was beyond the reach of Australia’s regulators.
However, Slattery says there is precedent for recouping losses.
“In the wake of the Trio/Astarra scam, there has been a misconception that SMSF trustees are swimming outside the flags when they lose their superannuation savings because of fraud or theft,” she says.
“A recent court settlement, in which an elderly woman got back most of the life savings of $1 million she lost in the Trio/Astarra fraud, is positive proof that SMSF trustees do have legal recourse when these tragic events occur.”
The woman and her husband, who were not named, had invested in several Astarra funds via an SMSF.
In their statement of claim, they alleged that the advisor had engaged in misleading and deceptive conduct, negligence, breach of fiduciary duty and breaches of the Corporations Act.
The terms of the settlement were kept confidential, as was the name of the financial advisor.
“It has always been SPAA’s contention that SMSF investors potentially do have options available to them should they suffer fraud or loss, and the court settlement is certainly strong evidence of this,” says Slattery.
“It’s critical that SMSF trustees and their advisors understand this, because most of the headlines after the Parliamentary Joint Committee (PJC) into Trio was handed down, and even some comments by those who gave evidence at the hearing, gave the impression that SMSF investors had no prospect of compensation in the event of fraud or theft.”
Slattery believes the court settlement also has important implications for the wording of any federal government or legislative-prescribed warnings for SMSF investors.
