Jailed Trio boss says planners shouldn't cop the blame

IN CASE the politicians examining the collapse of the Trio/Astarra funds did not fully appreciate his views on the fund management industry, the jailed Trio boss Shawn Richard has issued a follow-up missive absolving financial planners.

By InvestSMART · 11 May 2012

By InvestSMART ·
11 May 2012

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"Financial planners should not be blamed in relation to the collapse of Trio Capital," Richard, one of the Trio fraud masterminds, said in an explanatory note that was posted on the parliamentary joint committee on corporations and financial services website on Wednesday.

"Financial planners along with their clients all had a justified expectation that the Astarra Strategic Funds had gone through multiple layers of checks and balances."

He noted that in his experience, financial planners had relied on "reputable research houses" to conduct detailed due diligence on the Astarra funds.

The committee will release its report next week, which details the biggest theft in Australian superannuation history. Richard had already provided a written submission, answering questions posed by the committee. In it, he said, "like most fund managers ... our goal was to establish relationships with the financial advisors who are the gatekeepers to investors". Nearly all the investors were "100 per cent reliant" on the advice of their financial planners. It was investors "fortune or misfortune" as to how the financial advisor structured that investment - those in self-managed super funds are ineligible for the federal government's compensation scheme, which has already paid out more than $50 million.

To date, three financial planning advisors have been penalised by the corporate regulator over Trio. In December, the Australian Securities and Investments Commission banned the Wollongong advisor Ross Tarrant for seven years for not complying with financial services law. Mr Tarrant is appealing against the ban, and during a brief hearing in the Administrative Appeals Tribunal, it emerged that one of the witnesses he would be calling was Richard. Mr Tarrant received more than $840,000 in payments from Trio, and has rejected claims that payments influenced his investment advice.

Mr Tarrant's company has been placed in liquidation, and clients have lost more than $23 million through investing in Trio. ASIC has also banned Peter and Anne-Marie Seagrim, the directors of a South Australian firm, for three years.

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Frequently Asked Questions about this Article…

What happened in the Trio Capital / Astarra Strategic Funds collapse?

The article describes the collapse of Trio Capital’s Astarra Strategic Funds as part of what’s been called the biggest theft in Australian superannuation history. Investors lost money after the funds failed and the matter has been the subject of a parliamentary inquiry and regulatory action.

Who is Shawn Richard and what has he said about the Trio collapse?

Shawn Richard is described in the article as the jailed former boss of Trio Capital and one of the ‘fraud masterminds’. He posted an explanatory note to the parliamentary joint committee on corporations and financial services website arguing that financial planners should not be blamed and saying planners and clients had a justified expectation that the Astarra funds had been through multiple layers of checks.

Did the article say financial planners were to blame for the Trio/Astarra losses?

No. The jailed Trio boss Shawn Richard argued financial planners shouldn’t be blamed, saying planners relied on reputable research houses and that investors expected funds had undergone checks. However, the article also notes the parliamentary inquiry and regulatory scrutiny into how the investments were recommended and sold.

What regulatory penalties have been imposed on advisers linked to Trio Capital?

The article reports that three financial planning advisers have been penalised by the corporate regulator. In December, ASIC banned Wollongong adviser Ross Tarrant for seven years (he is appealing), and ASIC also banned Peter and Anne‑Marie Seagrim, directors of a South Australian firm, for three years.

What happened to adviser Ross Tarrant and how much did investors lose?

Ross Tarrant was banned for seven years by ASIC and is appealing the ban. The article states he received more than $40,000 in payments from Trio, which he rejects as having influenced his advice. His company has been placed in liquidation and clients have lost more than $23 million through investing in Trio.

Is there a government compensation scheme for people affected by the Trio collapse?

Yes — the article notes a federal government compensation scheme has already paid out more than $50 million. It also states that investors in self‑managed super funds (SMSFs) are ineligible for that scheme.

Where can I read the parliamentary inquiry findings and Shawn Richard’s submission?

According to the article, Shawn Richard posted an explanatory note and provided a written submission on the parliamentary joint committee on corporations and financial services website. The committee was due to release its report next week, which will detail findings about the collapse.

What practical steps for investors does the article highlight in light of the Trio/Astarra case?

The article highlights that many investors were heavily reliant on financial advisers and that advisers relied on research houses. Practical takeaways for everyday investors include asking advisers how due diligence was done, whether reputable research houses reviewed the fund, checking eligibility for compensation schemes (SMSFs may be ineligible), and paying attention to any payments or conflicts disclosed between fund managers and advisers.