A Parliamentary Committee reviewing the collapse of the Trio superannuation funds has highlighted the fact that self-managed superannuation fund (SMSF) trustees should be more adequately informed of the additional risks involved in stepping outside of prudential regulation.
Former Labor minister Nick Sherry queried senior Australian Prudential Regulation Authority (APRA) officials about why SMSF investors in the Trio funds might have been unaware that they would not have been eligible to access Government-backed compensation arrangements, and if they thought those investors should have been informed when they were stepping into particular risk areas.
"At least as part of their consideration in setting up an SMSF, don’t you think it is an appropriate risk issue that they should be aware of?" Sherry asked the APRA officials
The APRA officials responded that similar arrangements could apply to those that apply when people dealing with banks need to be notified that, when they are dealing with finance companies, they are not subject to the depositor protection provisions of the act.
Sherry said he was surprised by such a response because of the special status of superannuation.
"Surely you would believe it appropriate that, if a person does move outside the prudentially regulated sector–about which I have no specific complaint or concern in relation to APRA’s activities–and into another sector–albeit in superannuation, and it is understandable why people don’t see the difference and the distinction–and a different structure that is not prudentially regulated, where there is no licensing as such and there is no direct checking of trustees, an individual should be informed as to the level of risk they may be taking if things do not work out?" he said.
"And theft or fraud has occurred in this case. Don’t you think that is a reasonable disclosure to make?" Sherry asked.
