Inquiry grills APRA chiefs

Senior officers called to explain failure to follow up valuation request of Trio Capital fund.

Senior officers called to explain failure to follow up valuation request of Trio Capital fund.

THE superannuation regulator was grilled yesterday about failing to follow up its request for a valuation of a Trio Capital fund, a year before it was discovered the fund had been defrauded of $123 million.

Senior officers of the Australian Prudential Regulation Authority were called before a federal parliamentary inquiry in Sydney yesterday investigating the collapse of Trio Capital and a fraud in its fund called Astarra Strategic.

Trio Capital collapsed in late 2009 after regulators were alerted by a whistleblower, John Hempton. Its investment manager, Shawn Richard, was jailed for 2? years earlier this month.

APRA officials portrayed a historical total of about $100 million in compensation paid for fraud from superannuation funds it regulates - including $55 million for Trio - as a ''pretty good result'' for the size of the super sector.

But the deputy chairman of APRA, Ross Jones, agreed with committee member Paul Fletcher that APRA had not addressed the root cause of the fraud in its early interventions with Trio since 2005, but had mainly focused on governance issues.

Mr Jones blamed the failure to detect the fraud on the ''gross incompetence'' of later directors of Trio Capital, who had inherited the structure of a fraud.

The inquiry also heard calls for a last-resort fraud compensation scheme, after members of a Trio fund called ARP Growth found their $58 million invested through do-it-yourself super funds were ineligible for compensation after Trio's collapse. And the inquiry heard descriptions of the fraud from the liquidator, PPB, including Astarra Strategic investing in non-existent companies.

The committee heard APRA had been involved with Trio as early as 2005 and had asked for a valuation of assets inside Astarra Strategic, but it never received the information it sought.

In October 2008, Trio wrote to APRA saying it had no available valuations for two Trio funds that were later found to be at the heart of the fraud, Astarra Strategic and the Exploration Fund.

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