The Australian Prudential Regulation Authority (APRA) deputy chairman Ross Jones has sought to distance the regulator from responsibility for the collapse of Trio Capital, arguing that while it regulated Trio it did not regulate the hedge funds to which Trio money was directed.
In an opening address to a Senate Estimates Committee hearing this week, Jones referred to the losses incurred as a result of the Trio collapse and said he wanted to "emphasise … that the fraud did not occur in an APRA-regulated entity, but in an offshore hedge fund, beyond the reach of Australia's regulators".
The deputy chairman's defence of the regulator has come in the face of criticism and concern contained in the report of the Parliamentary Joint Committee, which reviewed the Trio collapse, concerning the performance of both APRA and its sister regulator, the Australian Securities and Investments Commission.
Elsewhere in his address, Jones seemed to suggest that self-managed superannuation fund (SMSF) trustees and financial planners had failed with respect to appropriately identifying the issues which ultimately led to the Trio collapse.
"…It would appear that SMSF trustees and financial planners who did have access to investment returns from the Astarra fund did not identify peculiarities in the returns," he said. "It was an independent whistleblower who highlighted that the pattern of returns was highly implausible."
Jones also claimed the impact of the Trio fraud on individuals has been made larger by the failure of some SMSFs to have appropriate risk diversification.
"The average exposure per member in the Astarra Strategic Fund for the APRA-regulated population is around $11,000," he said. "The material provided to the Parliamentary Joint Committee suggests that the asset concentration by certain SMSFs in the Astarra Strategic Fund has led to losses that are considerably greater than that amount.
"This would suggest that these investors were considerably more exposed to particular investment vehicles than prudent diversification would warrant," Jones said.
However, Jones also acknowledged that APRA does not currently collect or publish data which would have helped identify any problems with the Trio/Astarra funds.
"APRA currently collects whole-of-fund data and does not have mechanisms that enable it to look at returns at the responsible entity [ASIC-regulated] level or investment option," he said. "The Astarra Strategic Fund was not APRA-regulated and APRA did not collect statistical returns from the fund."
