A recent court decision has shown avenues for compensation do exist for self-managed superannuation fund (SMSF) trustees in the event of losses arising from theft or fraud, despite popular opinion otherwise.
"In the wake of the Trio/Astarra scam, there has been a misconception that SMSF trustees are swimming outside the flags when they lose their superannuation savings because of fraud or theft," Self-Managed Super Fund Professionals' Association of Australia (SPAA) chief executive Andrea Slattery said.
"A recent court settlement, in which an elderly woman got back most of her life savings of $1 million she lost in the Trio/Astarra fraud, is positive proof that SMSF trustees do have legal recourse when these tragic events occur."
The Corporations Act was the piece of legislation the trustees in question relied upon to win their compensation case, rather than the Superannuation Industry (Supervision) Act.
The basis of their successful action was a claim against the financial adviser they were using alleging they had been negligent, engaged in misleading or deceptive conduct that represented a breach of fiduciary duty and other legal obligations dictated by the Corporations Act.
"It has always been SPAA's contention that SMSF investors potentially do have options available to them should they suffer fraud or loss, and the court settlement is certainly strong evidence of this," Slattery said.
"It's critical that SMSF trustees and their advisers understand this, because most of the headlines after the Parliamentary Joint Committee into Trio was handed down, and even some comments by those who gave evidence at the hearing, gave the impression that SMSF investors had no prospect of compensation in the event of fraud or theft."
She said SMSF trustees had to be mindful of the wording prescribing their compensation options dealing with fraud as it often only dealt with one method of action when more than one might exist.
