Concerns over elements of the federal government’s advice reforms as well as the actions of two key regulators have prompted a parliamentary committee to delay the release of its final report into the collapse of Trio Capital (Trio).
On 24 November, the Parliamentary Joint Committee (PJC) on Corporations and Financial Services announced it would not release its final report as promised but would instead extend its reporting date until 9 May next year.
“The committee is aware that their report into the collapse of Trio is highly anticipated by a wide range of stakeholders; however, the committee requires the extension in order to properly make further inquiries into [a number of issues],” the PJC said in an interim report.
The decision for the extension stems from a number of issues the PJC has deemed require further investigation.
The issues include the extent to which ASIC and APRA successfully dealt with the issue of Trio associated fund, the ARP Growth Fund, and the conclusion that it was “the victim of market failure rather than fraud”, the report said.
Other issues under further consideration are the capacity of the financial services regulatory regime to deal with international fraud, the extent to which “gatekeepers”, including auditors, custodians, research houses and financial planners have failed.
“This is particularly in light of comments made by Mr Greg Medcraft, Chairman, ASIC, that ‘This particular crisis-what happened in Trio and ARP-is a good example of what I think is gatekeeper failure,” the report said.
“It does start with the responsible entities: the directors and the executors of the responsible entities, the investment manager, the compliance committee, the compliance plan audit, the research houses, the custodians, the advisers,” it said.
The PJC said the role of auditors and auditing standards was a specific issue as was the regulation of managed investment schemes and the role played by responsible entities.
Another concern for the PJC was compensation arrangements for investors affected by fraud or misconduct under the Corporations Act 2001 and the need to improve current levels of financial literacy.
“The committee are currently considering a range of issues in relation to the collapse of Trio Capital [including] the interplay of any recommendations from this inquiry with actions already underway in relation to [FOFA] reforms and proposals for reshaping the compensation system coming out of the Review of Compensation Arrangements for Consumers of Financial Services being undertaken by the Treasury,” the report said.
The PJC has received 72 submissions and held six public hearings as part of its inquiry.
