SMSFs have plenty of compensation options: SPAA
The Self-Managed Super Fund Professionals' Association (SPAA) has moved to correct the "misconception" that SMSF trustees have no legal options ahead of them in the event of fraud or theft.
In the wake of the Parliamentary Joint Committee inquiry into the collapse of Trio Capital, it has been widely purported that SMSFs have "nowhere to go" because they are not APRA-regulated and therefore do not have access to Part 23A of the Superannuation Industry (Supervision) Act, said SPAA chief executive Andrea Slattery.
"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," said Slattery.
Slattery pointed to a recent court settlement in which an elderly woman was compensated nearly 100 per cent of her $1 million life savings that was lost in the Trio/Astarra fraud.
SPAA technical manager Peter Burgess said SMSFs could also take legal action against an adviser for losses under section 55(3) of the SIS Act, or alternatively under Corporations Law.
Part 23A of the Act gives the Minister discretion to order compensation for members of APRA-regulated funds who have suffered losses due to theft or fraud.
But Part 23A is not always enacted to compensate members of APRA-regulated funds, said Slattery.
"There was a postal fraud a couple of years ago, and an overseas Mafia theft of monies out of bank accounts that were from super funds. None of those were instigated under Part 23A, and they're having to find other avenues," she said.
Burgess said the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority are clamouring for alerts and disclaimers for SMSFs, and for SMSF trustees to be required to sign a declaration saying they are aware they are not covered under Part 23A.
"We think it's important you get that wording right. Yes it's true they're not covered under Part 23, but they potentially have other options available to them," Burgess said.
"APRA-regulated funds also have a role to play here in disclosing the limitations of Part 23 to their members," he added.
Recommended for you
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
The ETF provider has flagged a number of developments as it formally enters the superannuation space through a major acquisition.
While all MySuper products successfully passed the latest performance test, trustee-directed products encountered difficulties.
Iress has appointed Insignia Financial’s former general manager of master trust and insurance products as its newest CEO of superannuation, who will take over from Paul Giles.
