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Trio directors forced out of super industry

IT WAS the largest theft in Australian superannuation history, when tens of millions in investors' money disappeared into offshore hedge funds.

IT WAS the largest theft in Australian superannuation history, when tens of millions in investors' money disappeared into offshore hedge funds.

Yesterday the Australian Prudential Regulation Authority announced it had accepted enforceable undertakings from two directors of the trustee, Trio Capital, removing them from responsible positions within the superannuation industry.

Trio's chief executive Rex Philpott undertook not to act as a trustee, investment manager or custodian of an APRA-regulated superannuation entity for 15 years. Trio's chairman, David Andrews, is similarly restricted in his dealings with the super industry for 10 years.

The chief executive of the Australian Institute of Superannuation Trustees, Fiona Reynolds, said she was concerned the undertaking did not extend across the wider financial services sector. APRA had regulatory authority across the superannuation sector, but it was the Australian Securities and Investment Commission which regulated financial services licenses.

"APRA has only done what is within its powers. I think 10 to 15 years is the right outcome because anyone who is entrusted with the responsibility of looking after or managing other people's money is in a position of trust, and when they breach that trust the penalties need to follow.

"I would hope that ASIC is also taking action ... it should be broadened so they are not able to be directors of any organisation that holds an Australian Financial Services Licence."

Wollongong man John Telford, who lost his $600,000 injury compensation lump sum, told BusinessDay it was "good to see justice being done" but he was frustrated that no offshore people involved in the money's disappearance had been arrested.

In a statement, APRA said Mr Philpott and Mr Andrews accepted they had failed to properly carry out their duties as directors. APRA found the two had failed to redeem existing investments in the offshore hedge fund, Exploration Fund Ltd, and the managed investment scheme Astarra Strategic Fund, and had continued making investments which by September 2009 amounted to $62.2 million.

ACT Super, which replaced Trio as acting trustee of the superannuation funds, has been unable to redeem any of the investments in the Astarra Strategic Fund "and has determined that the funds have been lost due to fraud or theft", APRA said.

It said the directors failed to consider the risks of investing in the offshore funds, the investment structure of the funds, and the lack of an arms-length relationship with the Exploration Fund, which was a related party.

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