Investor wins back $1m in Trio fraud

AN ELDERLY woman who lost her life's savings of $1 million in the Trio/Astarra fraud has succeed in having most of her money returned following a court settlement with her financial planner.

By InvestSMART · 8 Jun 2012

By InvestSMART ·
8 Jun 2012

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AN ELDERLY woman who lost her life's savings of $1 million in the Trio/Astarra fraud has succeed in having most of her money returned following a court settlement with her financial planner.

The settlement is believed to be the first time that investors who lost $176 million in an offshore hedge funds fraud have been compensated by their adviser.

Lawyer Martin Culleton, for the Wollongong firm RMB Lawyers, said the woman and her husband had invested principally through a self-managed super fund in several of the Astarra funds.

The court action was launched 10 months ago in the New South Wales Supreme Court against six defendants, Mr Culleton said.

It was claimed the adviser had engaged in misleading and deceptive conduct, negligence, breach of fiduciary duty and breaches of the Corporations Act.

Mr Culleton said it was important that people investigated both their financial planner, and the companies they worked for during the time they provided advice.

"The difficulty for the law is trying to decide what was reasonable, as to what the financial advice was," he said.

He said the terms of the settlement were confidential, and declined to name the financial adviser, but said it was notthe high-profile Wollongongplanner Ross Tarrant, who isfighting a seven-year ban imposed on him by the corporateregulator.

Mr Culleton said as far as he knew, no disciplinary action had been taken against the adviser in this case.

The successful outcome gives some hope to thousands of investors who were left stranded because they had invested in Trio/Astarra through self-managed super funds.

The Minister for Financial Services and Superannuation, Bill Shorten, explained that these investors were "swimming outside the flags".

He said only mainstream superannuation funds supervised by the Australian Prudential Regulation Authority were eligible for government compensation after the fraud.

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Frequently Asked Questions about this Article…

What was the Trio/Astarra fraud and how did it affect everyday investors?

The article describes an offshore hedge fund fraud involving Trio/Astarra that left thousands of investors stranded. One elderly couple, who invested largely through a self-managed super fund (SMSF), lost about $1 million of their life savings. In total, investors lost around $176 million in the Astarra funds.

How did the investor get money back after the Trio/Astarra losses?

The elderly woman successfully recovered most of her $1 million following a court settlement with her financial planner. The settlement was reached after legal action in the New South Wales Supreme Court and is believed to be the first time investors in this fraud have been compensated by their adviser.

Through which vehicle were the Trio/Astarra investments made?

According to the article, the woman and her husband invested principally through a self-managed super fund (SMSF) in several of the Astarra funds.

What legal claims were made against the financial adviser in the court action?

The court action, launched against six defendants, alleged the adviser engaged in misleading and deceptive conduct, negligence, breach of fiduciary duty and breaches of the Corporations Act.

Are the settlement details or the adviser’s name publicly available?

No. The terms of the settlement were confidential and the lawyer declined to name the financial adviser. He did, however, say the adviser was not the high-profile Wollongong planner Ross Tarrant.

Does this case mean regulators have disciplined the adviser involved?

The lawyer in the case said that, as far as he knew, no disciplinary action had been taken against the adviser in this particular matter. The settlement and disciplinary records were not publicly detailed in the article.

What practical steps does the article suggest everyday investors should take about financial planners?

Lawyer Martin Culleton urged people to investigate both their financial planner and the companies the planner worked for at the time advice was given. He noted legal questions often turn on what was reasonable advice in the circumstances.

Will the government compensate Trio/Astarra investors who lost money?

The Minister for Financial Services and Superannuation, Bill Shorten, said investors who were 'swimming outside the flags'—for example using non‑mainstream arrangements like some SMSFs—were not eligible for government compensation. He said only mainstream super funds supervised by the Australian Prudential Regulation Authority (APRA) were eligible for government compensation after the fraud.