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APRA disqualifies superannuation trustees - Colors Superannuation Fund

5 Mar 2003

Dr Darryl Roberts, Head of Enforcement at the Australian Prudential Regulation Authority (APRA), today announced the disqualification of Mr Norman Zuppicich and Mr John Bayford from acting as responsible officers of a superannuation trustee, investment manager or custodian on the grounds that they were directors of a trustee of a superannuation entity at a time when the trustee was in serious contravention of the Superannuation Industry (Supervision) Act 1993 (the SIS Act), and that they failed the ‘fitness and propriety’ test required by the SIS Act.
Both were former trustee directors of the failed Melbourne-based Colors Superannuation Fund (“the Fund”), which lost in excess of $300,000.All members of the Fund were employees of Colors Pty Ltd and associated entity, Visual Narrative, now in liquidation.
The decision to disqualify was based on the view that each failed to exercise a reasonable degree of care and diligence in carrying out his trustee duties. In particular, an investigation found a failure to comply with the in-house asset provisions of the SIS Act. These generally prohibit a fund investing more than 5 per cent of assets in the employer-sponsor and are intended to prevent workers’ retirement benefits being held hostage to the fortunes of their employer-sponsor.
The disqualifications are subject to appeal. Each disqualified person has 21 days from the date of notice in which to lodge a request for internal review of the decision by APRA. If still dissatisfied with the outcome, he may appeal to the Administrative Appeals Tribunal.
The Acting Trustee of the fund has applied to the Commonwealth Government for compensation under provisions in the SIS Act, which allow for compensation for losses suffered under certain circumstances, if that is judged to be in the public interest. The application is currently being assessed.
The SIS Act requires trustees, amongst other things, to act honestly and in the best interests of beneficiaries, to exercise care, skill and diligence and to formulate and give effect to an investment strategy for the fund that balances risk and return.
Dr Roberts said that APRA would remove trustees who had failed to exercise due competence, care, diligence or prudence from key industry roles.
“APRA’s primary concern is to protect the best interests of superannuation beneficiaries.”
The investigation into the activities of the Fund continues.
APRA is the prudential regulator of the financial services industry including banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. It currently regulates $1.5 trillion in assets for 20 million Australians.