The Australian Prudential Regulation Authority (APRA) today announced it has accepted an enforceable undertaking from former Trio Capital Limited (Trio) director David O’Bryen. Trio was formerly the licensed trustee of five registered superannuation entities as well as the responsible entity of a managed investment scheme known as the Astarra Strategic Fund (the ASF), a fund of hedge funds.
Mr O’Bryen is the fifth Trio director to give an enforceable undertaking to APRA arising out of APRA’s investigation into the collapse of Trio.
Mr O’Bryen was a non-executive director of Trio from June 2007 until Trio’s collapse in December 2009. He was also a member of the Risk and Compliance Committee from December 2007 to December 2009 and Chairman of that Committee from August 2008 to November 2008 and again from February 2009 to December 2009. Mr O’Bryen has undertaken not to act as a trustee or as a responsible officer of a body corporate that is a trustee, investment manager or custodian of an APRA-regulated superannuation entity for a period of five and a half years.
Mr O’Bryen has acknowledged APRA’s concerns that he failed to carry out his duties properly as a director of a superannuation trustee. APRA’s concerns included that Trio:
- failed to redeem existing investments in the Exploration Fund Limited (EFL), an offshore hedge fund, given:
o there was a lack of arms’-length arrangements in place as the EFL was a related party to Trio;
o the investment risks associated with the EFL; and
o Trio had failed to comply with the provisions in its Overarching Investment Policy dealing with hedge fund and related party investments;
- failed to redeem existing investments in the ASF and made ongoing investments in the ASF, given there were similar issues to those associated with the EFL investment. Trio failed to adequately consider counterparty risk, the risks of investing in offshore hedge funds and the risks associated with the investment structure of the ASF through Deferred Purchase Agreements; and
- caused the Trio superannuation entities’ interests in the EFL to be transferred to the ASF, pursuant to an in specie transfer, which resulted in the superannuation entities assuming the counterparty risk and other risks associated with the investment structure of the ASF.
The Trio superannuation entities’ investments in the ASF have not been able to be redeemed and ACT Super Management Pty Limited (ACT Super), the Acting Trustee appointed to the Trio superannuation entities, has determined that the funds have been lost due to fraud or theft.
Mr O’Bryen accepts that, with the benefit of hindsight, and with what has since transpired, he should have acted differently in relation to APRA’s concerns, and genuinely regrets the consequences that arose.
APRA Deputy Chairman Ross Jones said that the acceptance of the enforceable undertaking was an appropriate resolution of the matters between Mr O’Bryen and APRA.
‘APRA has now accepted enforceable undertakings from all those individuals who were on the Trio Board at the time of its collapse in December 2009. The enforceable undertakings prevent each of the former Trio directors from holding senior roles in the superannuation industry,’ Mr Jones said.
‘APRA is continuing its enforcement action to identify and take action against any other former Trio directors who have failed to meet the high standards expected of them as superannuation trustee directors and not acted in the best interests of members.’
APRA’s investigation in relation to Trio is continuing. A copy of Mr O’Bryen’s enforceable undertaking can be downloaded at: http://www.apra.gov.au/CrossIndustry/Pages/EnforceableUndertakings.aspx.
APRA has previously accepted enforceable undertakings (EUs) from the following former Trio directors who have undertaken not to act as a trustee or as a responsible officer of a body corporate that is a trustee, investment manager or custodian of an APRA-regulated superannuation entity:
- Natasha Beck — EU announced on 4 July 2011 for a period of four years;
- Rex Phillpott — EU announced on 8 September 2011 for a period of 15 years;
- David Andrews — EU announced on 8 September 2011 for a period of 10 years; and
- Keith Finkelde — EU announced on 19 September 2011 for a period of six years.
On 13 April 2011, in response to an application by ACT Super and on the recommendation of APRA, the Assistant Treasurer, the Hon. Bill Shorten MP, announced his decision to grant approximately $55 million in financial assistance to over 5,000 members of the Trio superannuation entities as a result of funds being lost to fraud or theft.
On 17 December 2009, APRA suspended Trio as the trustee of its four superannuation funds and one pooled superannuation trust, and appointed ACT Super, a subsidiary of McGrathNicol, as Acting Trustee to manage these five entities. APRA suspended Trio and appointed ACT Super as a result of numerous breaches of Trio’s licence conditions and it not being able to satisfy APRA’s concerns regarding the valuation of superannuation assets.
APRA commenced its investigations in relation to the Trio superannuation entities in October 2009. The Australian Securities and Investments Commission (ASIC) has also been conducting a concurrent investigation into Trio Capital. Both agencies have been cooperating with each other with respect to their investigations.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $3.7 trillion in assets for 22 million Australian depositors, policyholders and superannuation fund members.
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