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Trio Capital reveals lack of safety net for SMSFs
The decision to not include self-managed superannuation funds (SMSFs) in the group of investors covered by the $55 million of financial assistance for Trio Capital investors has sparked calls for a compensation scheme to be established.
The Self-Managed Super Fund Professionals Association (SPAA) said there should be a compensation mechanism similar to that of funds regulated by Australian Prudential Regulation Authority (APRA) to cover instances where members have lost money due to fraud.
SPAA chairman Sharyn Long said the association made this point in its submission to the recent Cooper Review.
This comes after the Minister for Financial Services, Bill Shorten, announced on Tuesday that only the 5,000 superannuation members who invested in Trio funds would receive financial assistance.
The compensation will be funded by way of a levy on all APRA-regulated funds, which will then be distributed to those funds whose members require compensation.
But the 690 direct investors, of which 285 are SMSFs, were told they would not be eligible for compensation as there was no compensation scheme set-up for these investors.
Instead, they were told to consider contacting the Financial Ombudsman Service.
Shorten was quoted as saying: “If people wish not to operate under those SMSF regulations, they’re free to become members of the APRA funds.”
SPAA chairman Sharyn Long acknowledged that SMSF investors had more control than those in large super funds. .
“However, this does not mean SMSF members should be forced to turn to a potentially protracted and expensive court process to seek redress in cases of fraud,” Long said.
Small Independent Superannuation Funds Association (SISFA) director Andrew Cullinan said he felt disappointed by the decision to exclude SMSFs from compensation.
“The basis for exclusion seems to be because they have a direct control over their investment base,” he said.
“It’s splitting hairs. People have to invest their superannuation somewhere, whether it is a mainstream fund or a SMSF, so that’s the choice you have to make.”
He said that if the government made a decision to compensate, it should cover all those involved, regardless of the vehicle they were investing through.
AUTHOR
Ashleigh McIntyre
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