Self Managed Superannuation Fund (SMSF) trustees should be informed of the additional risks which exist when they step outside the system overseen by the Australian Prudential Regulation Authority (APRA).
That is the bottom line of an exchange within a Parliamentary Committee reviewing the collapse of the Trio superannuation funds, with former Labor minister, Nick Sherry, having queried senior APRA officials about why SMSF investors in the Trio funds might have been unaware of why they would not have been eligible to access Government-backed compensation arrangements.
Sherry asked the APRA officials whether they thought it would be appropriate for SMSF investors to be informed when they were stepping into particular risk areas.
"At least as part of their consideration in setting up an SMSF, don’t you think it is an appropriate risk issue that they should be aware of?" Sherry asked the APRA officials
The APRA officials responded that there could be similar arrangements to those that apply when people dealing with banks need to be notified that when they are dealing with finance companies they are not subject to the depositor protection provisions of the act.
Sherry said he was surprised by such a response because of the special status of superannuation.
"Surely you would believe it appropriate that, if a person does move outside the prudentially regulated sector–about which I have no specific complaint or concern in relation to APRA’s activities–and into another sector–albeit in superannuation, and it is understandable why people don’t see the different and the distinction–and a different structure that is not prudentially regulated, where there is no licensing as such and there is no direct checking of trustees, an individual should be informed as to the level of risk they may be taking if things do not work out?" he said.
"And theft or fraud has occurred in this case. Don’t you think that is a reasonable disclosure to make?" Sherry said.
