COMPERE: The Federal Government will this week begin paying compensation to investors who lost superannuation funds in the one-hundred-and-twenty-five million dollar collapse of Trio Capital. Trio collapsed three years ago when a whistle-blower alerted authorities to fraud within the fund.
More than five-thousand people will share in about fifty-four million dollars worth of compensation, but another seven-hundred people will miss out. The Minister for Financial Services and Superannuation, Bill Shorten, explained to Ashley Hall why they’re not entitled to Government help.
ASHLEY HALL: For those eligible for compensation, this is a good news story that the Minister for Financial Services and Superannuation, Bill Shorten, is quite keen to sell.
BILL SHORTEN: Five-thousand-three-hundred-and-fifty-eight people who were in APRA regulated funds who were defrauded of their superannuation in the collapse of Trio will receive reimbursement for the money which was misappropriated.
ASHLEY HALL: But not everyone who suffered in the collapse of Trio Capital will get compensation from the Government.
BILL SHORTEN: There are about six-hundred-and-ninety investors who aren’t entitled to compensation, including two-hundred-and-eighty-five self managed superannuation fund investors.
ASHLEY HALL: Why are they not entitled to compensation?
BILL SHORTEN: They’re not entitled, because we have a regulatory protection scheme for people who are in superannuation funds, which submit themselves to the APRA processes. Other people who made direct investments or invest beyond the flags don’t receive the current compensatory mechanisms.
ASHLEY HALL: But at the moment, it’s buyer beware, as far as self managed super funds are concerned.
BILL SHORTEN: Well, we have a part of legislation, which we’ve put in place in 1993 and has been used on about three occasions since then to compensate people who are the victims of malfeasance, but what happens is if you’re investing in a fund, which doesn’t submit itself to full APRA scrutiny, then it is buyer beware.
I don’t believe people choose to be - have their money stolen - of course not. But I do believe that people, when they set up self managed superannuation funds, do know the up sides and down sides of that particular asset class.
ASHLEY HALL: But that doesn’t wash with some of the victims of the collapse. Take John Telford as an example. He’s a retiree living in the Wollongong area, who was awarded six-hundred-thousand dollars in compensation after a motor vehicle accident. Thinking he was following the rules, he invested the money with Trio and was receiving a regular pension, until the fund collapsed. He says, he didn’t know when he signed up to the Trio funds that he was taking out a self managed superannuation fund.
JOHN TELFORD: Why is it possible that there could be different ones in the marketplace and they don’t tell the customer when a customer is put into one?
ASHLEY HALL: Because you didn’t know that your fund was self managed.
JOHN TELFORD: No, that’s correct and I certainly did not know that there was such a thing as an insurance cover for fraud and that one fund had one and the other fund did not have one.
ASHLEY HALL: Mr Telford says he’s made every effort to find other avenues of compensation, by going after a bank, a ratings agency, an ombudsman and the planner who advised him to join Trio, but each time, he’s reached a brick wall.
JOHN TELFORD: There is a possibility of professional negligence going through the courts.
ASHLEY HALL: That’s against the financial advisor?
JOHN TELFORD: That’s against the financial advisor, but that could cost more money to take it through the legal system than what is available in compensation.
ASHLEY HALL: So what’s the chance of you getting any of your money back?
JOHN TELFORD: Pretty, you know, it’s pretty vague.
ASHLEY HALL: The Minister, Bill Shorten, says the Government is looking at whether better regulation is needed.
BILL SHORTEN: I believe one of the ways we can help discourage the likelihood of people being unwittingly pushed into risky products, which don’t suit - which are not appropriate for the investor is to remove the payment of commissions. In other words, financial - some financial planners, most of them do an excellent job, but some get paid - encourage people into products, such as the Trio.
I’m not saying the planners knew what Trio was up to, but they receive large commissions from the product providers, such as Trio, to encourage people to invest in these funds. It is most important that the Parliament passes laws to improve the transparency of advice provided by financial planners and that we also eliminate conflicted remuneration structures.
We want, in every case, financial planners to be working for their customers, not for product providers for whom they recommend the customers invest in.
COMPERE: That's the minister for financial services and superannuation Bill Shorten speaking to Ashley Hall.
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