The Australian Financial Complaints Authority (AFCA) will assess cases where SMSF trustees seek compensation from a financial firm where the fund has been wound up before a determination was made, but would not allow any monies to exit the super system prematurely.
Speaking during a question and answer session at an AFCA member forum last Friday, senior ombudsman Alexandra Sidoti acknowledged these situations can be “tricky” and cited a clause in the authority’s operating rules allowing such claims to be considered.
“This has come up a little bit in the context of the Compensation Scheme of Last Resort, just because complaints have been on pause for such a long time and often you’ll have complainants who are really trying to mitigate their loss, and part of that might be actually winding up their SMSF and rolling back into an Australian Prudential Regulation Authority-regulated fund,” Sidoti noted.
“In those circumstances, we still consider that claim of compensation to be what we would call an indivisible claim, so it can’t be divided up separately between different members of the fund, but we would allow, under rule B.2.1.e, complainants who were former beneficiaries of that SMSF to bring their complaint to AFCA.
“We can still basically determine the complaint as if the SMSF still existed, but the compensation payment would then go to the former beneficiaries in the superannuation environment.”
She added the complaints authority generally requires all members of the fund to participate in seeking a determination for the matter to be reviewed.
“In most circumstances, we would want all beneficiaries to be party to that complaint for us to consider it, simply because we do consider it to be an indivisible claim,” she said.
“That’s not completely without exception; there are some circumstances where it’s just not practical or there might be other vulnerability considerations that we take into account.”
She reiterated any compensation awarded must be transferred to new superannuation accounts to ensure trustees do not access their entitlements prematurely.
“It’s still important that they don’t get some magical early release from super just because they’ve wound up their SMSF. We would still be looking for payment to be made into the superannuation environment [and to] go to their new funds,” she said.
