Brite Advisors Pty Ltd

The Receivers are continuing to progress their investigations and assess possible recovery actions. While the Receivers were required to undertake certain investigations and report to the Court, the investigations into the affairs of Brite Advisors are also critical to identify potential recovery actions available to the Receivers to increase the funds available to Beneficiaries.

The Receivers have reported to the Federal Court of Australia (the Court) on several matters arising from their investigations, including a number of suspected contraventions and offences by Brite Advisors and its directors and officers.  For further detail, please see section 8 of the Receivers' report to the Court dated 24 January 2024 and section 6 of the Receivers’ report to the Court dated 9 August 2024. Link: Report dated 24 January 2024

The Receivers continue to investigate, with legal input, whether any recovery actions are available and able to be pursued against various third parties, having regard to factors including prospects, costs and commerciality considerations. 

If recovery actions are pursued, any recoveries from those actions may be available to respond to Beneficiaries’ entitlements (after deduction of costs, and any other relevant deductions, including any deductions required to be paid under a litigation funding agreement, if applicable). 

At this stage, it is expected that it will take some time before the Receivers will be able to conclude their investigations.  As such, recovery actions are currently unquantified, could be protracted and any return available to satisfy Beneficiaries’ entitlements is uncertain.  Accordingly, the Receivers have not factored in any potential recoveries into the estimated shortfall.

Please note that Australian Securities and Investments Commission (ASIC) continues to investigate Brite Advisors and its directors and officers in respect of suspected contraventions and offences which it has jurisdiction to prosecute in the public interest.  It is important to note that this is separate from the Receivers' investigations and any proceedings they may commence, which are focused on recovering funds for Beneficiaries and creditors.

Please see ASIC’s website for further information relating to the status of its investigations into Brite Advisors.  

Please refer to section 8 of the Receivers' report to the Court dated 24 January 2024 and section 6 of the Receivers’ report to the Court dated 9 August 2024.

Link: Report dated 24 January 2024 and Report dated 9 August 2024

Liquidators and Receivers have broad powers of investigation and a statutory duty to report any suspected contraventions of the Corporations Act 2001 by Brite Advisors and its directors and officers to ASIC.

ASIC also have powers to bring claims against relevant and responsible parties. The successful pursuit of such claims by ASIC can result in financial infringement, banning orders and in some cases jail time. The Receivers and Liquidators are working closely with ASIC and will continue to keep ASIC updated as to the status of their investigations.

The Receivers’ investigations have identified suspected misuse of Client AuM and related suspected breaches of the law over a prolonged period of time.  The Receivers continue to investigate, with legal input, whether any recovery actions are available and able to be pursued against various third parties, having regard to factors including prospects, costs and commerciality considerations.   

If recovery actions are pursued, any recoveries from those actions may be available to respond to Beneficiaries’ entitlements (after deduction of costs, and any other relevant deductions, including any deductions required to be paid under a litigation funding agreement, if applicable).   

At this stage, it is expected that it will take some time before the Receivers will be able to conclude their investigations.  As such, recovery actions are currently unquantified, could be protracted and any return available to satisfy Beneficiaries’ entitlements is uncertain.  Accordingly, the Receivers have not factored in any potential recoveries into the estimated shortfall. 

The Court Orders made on 21 December 2023 provided that, subject to Court oversight and approval, the Receivers’ fees, costs, and expenses (including those relating to their former appointment as Investigative Accountants) are to be paid from the Property (as defined in the Court Orders).

What did the Court define as the “the Property”?

The "Property" is defined by the Court Orders as "all real or personal property, assets, or interests in property of any kind, within or outside Australia and includes any property held otherwise than as sole beneficial owner."

This means all property of Brite Advisors, including property that it holds in its own right as well as property that it holds on behalf of others.  This includes the Client AuM.

The Receivers’ remuneration, fees and costs are required to be reviewed and approved by the Court, to ensure that the charges are reasonable, and the work undertaken has been necessary and properly performed before the Receivers are paid. All Corporate Trustees are notified of the respective amounts and provided with the Receivers’ remuneration and costs and expenses reports immediately after they are submitted to the Court.

Link: 21 December 2023 Court Order

The Receivers are responsible for managing and dealing with Client AuM, including protecting the interests of underlying Beneficiaries and returning Client AuM to Beneficiaries in the manner that the Court agrees is fair and equitable to all.  

The Receivers are the only persons authorised to act on behalf of Brite Advisors and the directors' powers are suspended.

The Liquidators are responsible for winding up the affairs of Brite Advisors and have greater powers of investigation and recovery against company directors and officers, and other third parties.

These are two very separate roles.

So, what does this mean for you? In summary, the Receivers will be dealing with you as a Beneficiary with an interest in the Client AuM, which is under the control of the Receivers. Following the return of Client AuM to Beneficiaries, you may also be a creditor of Brite Advisors in the Liquidation for any shortfall you may suffer on your investment in Client AuM, which will be quantified in due course. 

Link: Update and Second FAQ

Link: Report dated 24 January 2024

The Receivers have undertaken a detailed analysis of the variance in the Client AuM.  Beneficiaries who would like to read further information should refer to section 6 of the Receivers’ 4 March 2024 report to the Court.

Link: Report dated 4 March 2024

As part of the formulation of a distribution strategy, the Receivers have filed their Distribution Framework Application and the Court made orders on 2 September 2024 confirming, in part, the Receivers’ indicative timeframe (September Orders). In accordance with the September Orders, the Receivers are required to do the following:

• conduct the Beneficiary Identity Proofing process (which is in progress);

• calculate Beneficiaries’ entitlements by reference to the value of the money and investments which were recorded as being held by each such Beneficiary in Brite Advisors’ systems as at 13 December 2023; 

• issue Beneficiary Valuation Notices and conduct the verification process;

• prepare and file with the Court a proposed explanatory memorandum that the Receivers intend to provide to the Beneficiaries and Corporate Trustees to explain the rationale for the Receivers’ proposed distribution of the Trust Assets;

• attend a further hearing currently scheduled for Wednesday, 13 November 2024 at 9am (AWST) where the Court will consider the proposed explanatory memorandum and, if the Court considers it to be appropriate, direct the Receivers to issue the explanatory memorandum to Beneficiaries and Corporate Trustees (Explanatory Memorandum Application Hearing);

• unless otherwise ordered by the Court, the Receivers will distribute the explanatory memorandum to all Corporate Trustees and Beneficiaries, and publish it on the Receivers' website, as soon as reasonably possible after the Explanatory Memorandum Application Hearing; and

• following distribution and publication of the explanatory memorandum, the Receivers will engage in a consultation period (the length of which will be determined at the Explanatory Memorandum Application Hearing).  The purpose of the consultation period is to receive, consider and address feedback and queries from Beneficiaries and Corporate Trustees on the matters covered in the explanatory memorandum.  The Receivers will take this feedback into account when finalising the orders they propose the Court makes in relation to the distribution of the Trust Assets.  

Our update of 9 August 2024 informing Beneficiaries and Corporate Trustees of the Application provided a copy of the original orders sought by the Receivers.  Not all of the orders contained in the Receivers minute of proposed orders were made by the Court on 2 September 2024, and some of them were held over for determination at the Explanatory Memorandum Application Hearing.

Those orders that his Honour wished to hold over related to:

• the consultation period allowing interested parties to provide feedback to the Receivers;

• the process for interested parties wishing to be heard by the Court on the Receivers' future application for the distribution of the Trust Assets to seek leave of the Court to do so; and

• filing and listing of the Receivers' future application for the distribution of the Trust Assets.

His Honour's view was that his decision on these matters should be deferred until after the Explanatory Memorandum Application Hearing when further information is available and the various workstreams that feed into that are further developed, including the Valuation Notices.

It is the Receivers' intention to work towards the indicative timeline set out in the Fourth Report at paragraphs [3.5.2] – [3.5.4] however, as highlighted in the Fourth Report, and recognised by his Honour's approach to deferring his decision in respect of certain matters, there are certain factors which may impact the Receivers’ ability to meet these dates and which are outside the Receivers’ control.

The distribution process is discussed further at FAQ 29.

The Receivers are considering whether, how and when any interim distribution could be made. In doing so, the Receivers must be prudent to ensure that the distribution will not later prejudice any Beneficiaries. Considering the circumstances outlined in the Fourth Report, formulating an approach to any potential interim distribution is complex.

For example, a Corporate Trustee or group of Beneficiaries may assert that the separation of assets into IBA sub-accounts was effective in segregating those assets and insulating them from the shortfall. In that case, the Receivers need to withhold adequate funds pending a determination of this issue, which will mean that an interim distribution is unlikely to be feasible.

However, we will issue a further update to Corporate Trustees and Beneficiaries once this analysis is complete.

Link: Report dated 9 August 2024

Link: Update & FAQ 28 August 2024

The Court has approved a protocol which enables the Receivers to adjudicate Beneficiary requests for the withdrawal of funds.  If you do need funds from your pension to meet your living costs or to avoid financial hardship, please speak with your pension administrator.  

A simple distribution by reference to the records held by Brite Advisors is not possible.

Beneficiaries may have understood that certain investments were held for them by Brite Advisors, received account statements that identified specific asset holdings with Brite Advisors at various times, or otherwise received reassurance from Brite Advisors (or other parties) relating to the assets held for them. However, this does not necessarily mean that those investments were actually held by Brite Advisors. This applies regardless of: (i) whether the investments were in the form of a model portfolio or bespoke investment; or (ii) whether Beneficiaries understood that their assets were purported to be held on a “segregated” basis. See the Receivers’ Fourth Report at [2.1.14], [2.1.17] – [2.1.18], [2.1.23] – [2.1.26], [5.6.1] – [5.6.2], [5.6.27] – [5.6.48], [6.8], and [6.9].

Link: Report dated 9 August 2024

In short, for the Court to make distribution orders, the Receivers will need to confirm that they have identified who should receive a distribution and how much they should receive.

Unfortunately, the existence of a deficiency in the Client AuM combined with the barriers in the Receivers gaining access to the critical systems leaves a large volume of work to be done before these questions can be answered conclusively and a distribution made.

As we have described, apart from rebuilding the critical systems required to identify and verify Beneficiary entitlements, there may be competing claims on the Client AuM and accordingly, it is important that: (i) Beneficiaries are provided an opportunity to verify their entitlements; (ii) interested parties are given an opportunity to be heard on the proposed method of distribution and (iii) the Receivers are following a fair and equitable process.

The Framework Orders take into account these factors.

The process to verify Beneficiaries’ entitlements will occur concurrently with the preparation of the Explanatory Memorandum and is addressed in the Fourth Report at [3.4.27] – [3.4.34].

However, before verifying Beneficiaries’ entitlements, the Receivers:

• have had to complete the rebuild of SalesForce (which is now complete); and

• need to verify the data, documentation and SalesForce environment to be made available to all Beneficiaries to ensure this is accurate and functional. 

The process and timetable to obtain orders from the Court relating to distribution of the Client AuM is detailed in the Fourth Report at [3.5.1] – [3.5.4].

In addition, before proposing an approach to distribution and seeking orders from the Court, the Receivers have the following further work to complete (addressed in the Fourth Receivers’ Report at [2.1.25] and [5.6.21] – [5.6.25]):

• further engagement with Corporate Trustees to confirm details of (i) how any assets or funds distributed to them will be dealt with once received by the Corporate Trustees, and (ii) the fee structure Corporate Trustees intend to impose on Beneficiaries in relation to that distribution. These are matters which the Receivers anticipate that the Court will want to be informed of prior to making any orders relating to the distribution of the Client AuM;

• consideration of the regulatory and taxation issues arising in various jurisdictions, many of which have been raised through feedback from the Corporate Trustees and Beneficiaries, which may impact the approach to distribution; and

• investigation into the significant volume of trading activity which occurred in respective IB accounts prior to events of purported segregation.

These matters are addressed in the Fourth Report at [3.4.7] – [3.4.26].

Link: Report dated 9 August 2024

From the information available, the Receivers have identified an estimated 10% variance between the total Client AuM reported to Beneficiaries as being held by Brite Advisors on their behalf and the actual Client AuM held by Brite Advisors as at 13 December 2023.  

Put another way, approximately 90% of Client AuM historically reported as being held by Brite Advisors has been located, secured and is under the control of the Receivers. The Receivers stress that the variance is still subject to investigations and will be subject to change. The factors impacting the variance are explained in detail at section 6 of the Receivers’ 4 March 2024 report.

Link: Report dated 4 March 2024

What does this mean for me? In simple terms, it means that, as at today’s date, Brite Advisors does not have enough money to pay all the Beneficiaries all the amounts owed to them.

The Receivers' investigations are ongoing, and a number of matters are yet to be resolved, including but not limited to:

1. further investigations into the variance in Client AuM;

2. completing the identity verification process for Beneficiaries;

3. establishing a process for Beneficiaries to review the Receivers’ calculations of their entitlements as at 13 December 2023;

4. further engagement with Corporate Trustees;

5. consideration of regulatory and taxation issues arising in various jurisdictions; and

6. ultimate distribution of funds to individual Beneficiaries.

These steps will take some time to work through.  

On 9 August 2024, the Receivers filed a distribution Framework Application to the Court. This application was heard by the Court on Wednesday, 21 August 2024 and Monday, 2 September 2024. The hearing was livestreamed on the Court's YouTube channel, the recordings of which are available here:

Link: Federal Court YouTube Channel

As part of the Framework Application, the Receivers provided the Court with a summary of the indicative timeline in the lead up to the ultimate Distribution Methodology Application.

Please refer to FAQ 29 and the Receivers’ update dated 5 September 2024 for a detailed explanation of the 2 September 2024 Hearing and the orders made by his Honour.

Link: Update to Trustees and Beneficiaries – 9 August 2024.  

Link: 2 September 2024 Orders; Update – 5 September

The Client AuM predominantly remains in accounts with IBA, which are under the control of the Receivers.

On 6 March 2024, the Court approved the engagement of a qualified interim fund manager to provide financial services, including:

1. monitoring the Client AuM;

2. providing recommendations to the Receivers on steps appropriate to manage risk and adherence to the applicable investment portfolio mandates; and

3. upon the instructions of the Receivers only, trade the Client AuM as needed to achieve this.

The Interim Fund Manager's appointment is to assist the Receivers in maintaining and preserving the value of the Client AuM. This is an important step in ensuring the ongoing management of the Client AuM for the benefit of the Beneficiaries. The appointment is an interim measure only to manage the Client AuM while the Receivers work towards developing a distribution proposal to return the Client AuM to the Beneficiaries.

On 17 June 2024, following the orders made by the Court on 5 June 2024 following conferral with IBA, BML Funds Management Pty Ltd (BML) was appointed Interim Fund Manager.

In relation to model portfolio investments, the rebalanced Client AuM is now invested in accordance with portfolio mandates, which comprises a broadly diversified portfolio and will continue to be managed accordingly.

In relation to bespoke investments, these assets are being monitored and reconciled on a regular basis.

As reported in the Fourth Report, Client AuM invested on the IB Platform (both model portfolio and bespoke assets) have performed favourably following aggregated growth of approximately 10% for the period from 13 December 2023 to 7 October 2024.

Weekly portfolio reports produced by the Interim Fund Manager are available via the Brite Advisors portal on the McGrathNicol website.

Link: Court Order 6 March 2024

Link: Court Order 5 June 2024

Link: Update to Trustees and Beneficiaries 20 May 2024

Link: BML Weekly Portfolio Reports

Link: Update & FAQ 28 August 2024

In short, the Receivers have not yet identified any bespoke investments held on the IBA platform which are conclusively traceable to a particular Beneficiary.  Even if they could, any such Beneficiary's claim to those assets is still impacted by the shortfall in assets. For further detail regarding the shortfall relating to bespoke assets, see the Fourth Report at [5.6.39] – [5.6.48], [5.6.83] – [5.6.86], [6.9] and Appendix A6. The Receivers are considering options for Beneficiaries to de-risk bespoke investments in circumstances where they may have an entitlement to particular assets.

Notwithstanding this, whilst bespoke investments (or non-model portfolio investments) held in Brite Advisors’ IB accounts have not been actively managed or traded by the Interim Funds Manager, these assets are being monitored and reconciled on a regular basis. As noted above, Client AuM invested on the IB Platform (both model portfolio and bespoke assets) have performed favourably since 13 December 2023.

The Receivers obtained orders from the Court on 27 March 2024 that they would be acting properly and are justified in refusing to act on specific trading instructions received from any third party, including individual Beneficiaries, the Corporate Trustees, and any financial advisor to those persons.

The Receivers obtained these orders because they were of the view that it is not possible to action such dealing instructions due to (i) the difficulty with forming a view as to any individual Beneficiary’s interest in the specific assets the subject of the instruction, and (ii) the risk that actioning any dealing instruction will prejudice another Beneficiaries’ position with respect to the Client AuM. This is addressed in the affidavit of Linda Smith dated 26 March 2024.

We note that there are now some instances where the Receivers can identify certain assets on the IBA platform to which an individual Beneficiary is entitled according to the 13 December 2023 data. However, even in relation to those assets, there remains a risk that actioning a dealing instruction would prejudice another Beneficiaries’ position with respect to the Client AuM. This is on the basis that the conduct which resulted in the shortfall, as described in section 6 of the Fourth Report, may give rise to claims against those assets by other Beneficiaries.

Link: Report dated 9 August 2024

No, the Interim Fund Manager will be managing the model portfolios on an aggregate basis in accordance with the 6 March 2024 Court orders at the instruction of the Receivers.

Link: Court Order 6 March 2024

For several reasons including but not limited to the identified variance and the comingling of the Client AuM, the Receivers are not able to consider specific trade requests from either Corporate Trustees or Beneficiaries at this time.

This position was confirmed by the Court pursuant to an order made on 27 March 2024.

Link: Court Order dated 27 March 2024

The Court has made Asset Preservation Orders and other Court Orders to protect the Client AuM whilst work is being undertaken to:

1. quantify and reconcile Client AuM losses, and 

2. progress a strategy to ultimately manage and return Client AuM back to Beneficiaries in an equitable manner. 

This means that only the Receivers and their authorised representatives can deal with the Property of Brite Advisors, as authorised by the Court Orders.

The Receivers do not agree that there has been any effective segregation of the Client AuM. However, the Receivers are aware that Brite USA has informed its clients that it believes their assets are segregated from Client AuM held for other Beneficiaries.

The assets held in the IBA omnibus account were separated into two sub-accounts in June 2021. One was designated as purporting to hold the assets of US-based Beneficiaries. The Receivers have considered the circumstances of this separation, and the information provided by Brite USA.

Whilst the Receivers’ investigations are still ongoing, the Receivers do not consider that the separation of assets into different IBA accounts in this way protected those assets from Brite Advisors conduct which has resulted in the shortfall in Client AuM. This is explained in further detail in the Fourth Report at [2.1.24] – [2.1.26], [4.6.9] – [4.6.12], [6.3.16] – [6.3.22], and [6.4].

The Receivers are progressing their investigations into how and why Brite Advisors separated the IBA omnibus account and will provide a further report upon completion of this investigation.

Link: 29 Feb 2024 – Update and FAQ-Funds Segregation

Link: March 2024 report to the Court

Link: Report dated 9 August 2024

Link: 28 August 2024 FAQ

As part of the entitlement verification process, Beneficiaries will be provided a valuation notice and the supporting information. The entitlement verification process and its timing is explained in further detail in the Receivers report to the Court dated 9 August 2024. 

Please note that the amount shown on your valuation notice is not the value which will be distributed for your benefit. The valuation notice will identify the value of the assets as at 13 December 2023 which Brite Advisors should have held on your behalf. This will be used as one input to determining the value to be distributed for your benefit. 

We note that Beneficiaries may have understood that certain investments were held for them by Brite Advisors, received account statements that identified specific asset holdings with Brite Advisors at various times, or otherwise received reassurance from Brite Advisors (or other parties) relating to the assets held for them. However, this does not necessarily mean that those investments were actually held by Brite Advisors. This applies regardless of (i) whether the investments were in the form of a model portfolio or bespoke investment, or (ii) whether Beneficiaries understood that their assets were purported to be held on a “segregated”basis.

Link: Report dated 9 August 2024

The Court has approved protocols for dealing with withdrawal requests. As part of those protocols:

• only regular pension withdrawals of a Beneficiary’s investment that were in place as at 9 November 2023 can be considered; and

• an eligible Beneficiary may not withdraw more than 50% of the recorded value of their investment, calculated by reference to the value of a Beneficiaries’ cash holdings and model portfolio assets as at 13 December 2023.

The protocol is intended to enable those Beneficiaries who have relied on regular withdrawals from their pension investments to continue to have access to those amounts, in a way that is fair and does not prejudice other Beneficiaries, given the identified variance in the Client AuM.

The Receivers recognise the importance of ensuring that Beneficiaries who rely on their pension for living costs continue to have access to their regular payments.  If you do need funds from your pension to meet your living costs or to avoid financial hardship, please speak with your pension administrator who will be able to assist you with submitting a request to the Receivers.

In the event you have invested directly with Brite Advisors, please send your pension payment withdrawal requests by email to briteadvisors@mcgrathnicol.com, including all necessary supporting documentation.  Please include "Pension payment withdrawal request" in the email subject line to allow the request to be efficiently categorised and allocated to a team member from the Receivers' team for processing.

Link: Court Order 21 December 2023

Link: Court Order 2 September 2024

Link: Update – 5 September 2024

The Receivers are unable to consider or process requests to transfer your pension investments out of Brite Advisors to another fund manager or custodian at this time, given the current Court Orders restricting distributions. 

Please note, the Court Orders are not intended to be permanent.  Rather they are intended to protect and preserve the Client AuM while the Receivers develop their proposal for a distribution process for return of the Client AuM.

Link: Court Order 21 December 2023

The appointment of a new Financial Advisor is a matter for you as a Beneficiary.

Should you appoint a new Financial Advisor, please advise our office (with documentary evidence) and we will update our records accordingly. As noted above, the Receivers will be unable to provide individual valuation statements to Beneficiaries.

Yes, Beneficiaries with no Corporate Trustee wishing to request a pension withdrawal should contact the Receivers office directly at briteadvisors@mcgrathnicol.com.  

The Receivers are empowered by the Court Orders to approve withdrawals required by a Beneficiary due to genuine financial hardship and will consider such requests on a case-by-case basis.  Please contact the Receivers’ office at briteadvisors@mcgrathnicol.com if you wish to submit a withdrawal request on the basis of financial hardship.

The books and records of Brite Advisors do not accurately record the account position of individual Beneficiaries and the Receivers do not currently have access to all the systems required to commence the process of verification of Beneficiaries' entitlements.

The Receivers are working to resolve this position and have been in continual communication, since appointment, with Brite Advisors respective information platforms, namely:

Interactive Brokers Australia (IBA)

The Receivers, together with the Interim Fund Manager have full access to all of Brite Advisors’ IBA accounts.

Salesforce

As Beneficiaries are aware, Brite Advisors’ custom built SalesForce platform and all relevant Beneficiary portfolio reporting data and documentation was inadvertently deleted by SalesForce in late April 2024. Since then, the Receivers have been working with SalesForce to rebuild the SalesForce org utilising back up data.

The SalesForce rebuild completed in early-September 2024. The Receivers are now working through the verification of the Beneficiary data to ensure that the data, documentation and SalesForce environment to be made available to all beneficiaries is accurate and functional.

AutoRek

AutoRek continue to provide the Receivers with access to the AutoRek data which has been critical to maintaining Beneficiaries’ positions. The Receivers are continuing to engage with the Liquidators of Brite Technologies Limited, a UK entity in the Brite Group, and AutoRek in relation to ongoing commercial and contractual arrangements.

Link: Update to Trustees and Beneficiaries – 20 May 2024

The Receivers are also aware that some Beneficiaries have received correspondence from a party purporting to provide “Brite Client Help”.

The Receivers did not authorise this communication and have no affiliation with the group purporting to provide “Brite Client Help”, nor have the Receivers shared, or consented to the sharing of, any personal Beneficiary data.

We encourage you to carefully consider whether you should provide any personal information to the persons purporting to provide support as offered in the communication.

Please note, for the avoidance of doubt, any communications concerning the Client AuM issued to you by any persons other than the Receivers and their firm, McGrathNicol, are not authorised by the Receivers. If you receive any communications regarding the Client AuM and are unsure of whether it has been authorised by the Receivers, please contact us at briteadvisors@mcgrathnicol.com. We strongly caution Trustees and Beneficiaries against interacting with these third parties in respect of the Client AuM.

The Receivers are of the view that the Advisory and/or Trustees’ fees are not trading expenses of Brite Advisors and therefore, they are unable to pay them while the current asset preservation orders remain in place.

We have received correspondence from several Beneficiaries indicating concern regarding their Trustee's independence or connection with Brite Group entities or associates. 

The Beneficiaries will be invited to provide feedback to the Receivers during the proposed consultation process (refer to FAQ 7) concerning the Receivers' proposed manner of distributing the Client AuM.  Any Beneficiary's feedback or concerns regarding their Trustee will be considered as part of that process.

The Receivers have engaged Crowe Horwath and Linklaters, UK Lawyers, to advise on the impact of pension regulations under the law of England and Wales, including taxation matters. The Receivers will also consider the regulatory and taxation issues arising in various jurisdictions, many of which have been raised through feedback from the Corporate Trustees and Beneficiaries, which may impact the approach to distribution.

These considerations will ultimately inform distribution methodology.

The Application was heard and determined by his Honour Justice O'Sullivan of the Federal Court of Australia on 2 September 2024 as set out in our update dated 5 September 2024.

Link: 2 September 2024 Orders; Update – 5 September 2024

Explanatory Memorandum for Distribution of Trust Assets (Orders 1 - 6)

The September Orders require the Receivers to file an application with the Court (which is referred to as the Explanatory Memorandum Application) which will include the following:

• the orders that the Receivers propose the Court makes for the distribution of the Trust Assets; and

• a proposed explanatory memorandum that the Receivers intend to provide to the Beneficiaries and Corporate Trustees to explain the rationale for the Receivers' proposed distribution of the Trust Assets.

A further hearing (which we have referred to above as the Explanatory Memorandum Application Hearing) will take place at which the Court will consider the proposed explanatory memorandum and, if the Court considers it to be appropriate, direct the Receivers to issue the explanatory memorandum to Beneficiaries and Corporate Trustees.  This hearing is currently listed on Wednesday 13 November 2024 at 9am (AWST) / 11:30am (ACDT). 

Unless otherwise ordered by the Court, the Receivers will distribute the Explanatory Memorandum to all Corporate Trustees and Beneficiaries, and publish it on the Receivers' website, as soon as reasonably possible after the Explanatory Memorandum Application Hearing.

Following distribution and publication of the explanatory memorandum, the Receivers will engage in a consultation period (the length of which will be determined at the Explanatory Memorandum Application Hearing).  The purpose of the consultation period is to receive, consider and address feedback and queries from Beneficiaries and Corporate Trustees on the matters covered in the explanatory memorandum.  The Receivers will take this feedback into account when finalising the orders they propose the Court makes in relation to the distribution of the Trust Assets.  

For further information and a detailed explanation of the explanatory memorandum process, please refer to the Fourth Report at paragraph [3.5.2] and page [23] rows [3] - [5] of the indicative timetable.

Verifying identities of Beneficiaries (Order 7)

The September Orders authorise the Receivers to take steps to verify the identity of each Beneficiary, including engaging a third-party contractor to undertake Identity Proofing. The Receivers have engaged GBG Global (GBG), to undertake the Identity Proofing for each Beneficiary on the Receivers' behalf.  GBG is suitably qualified to undertake the Identity Proofing and specialises in identity verification and fraud prevention. 

We have issued a separate circular to Beneficiaries and Corporate Trustees detailing the steps required to complete the Identity Proofing. If Beneficiaries have any queries regarding the Identity Proofing process or have not received an email inviting them to conduct the Identity Proofing process, please email BriteAdvisorsIdentification@mcgrathnicol.com.

Link: Update – 24 September 2024

It will be necessary for Beneficiaries to successfully complete the Identity Proofing process before they will be able to access their Valuation Notice.

Calculating entitlements of Beneficiaries (Order 8)

The September Orders require the Receivers to calculate Beneficiaries’ entitlements by reference to the value of the money and investments which were recorded as being held by each such Beneficiary in the defendant’s systems as at 13 December 2023. 

The basis of the Receivers' calculation of each Beneficiaries' entitlement will be set out during the verification of entitlement process on the web-based portal.

For further information in relation to the calculation of the entitlements of Beneficiaries, please refer to the Fourth Report at [3.4.1] - [3.4.6] and [3.4.13] - [3.4.19].

Beneficiary Valuation Notices (Order 9)

The September Orders establish a framework for Beneficiaries to access, review, and confirm or dispute their Valuation Notice. The Valuation Notice will set out the value of the investments that Brite Advisors should have been holding on each Beneficiaries' behalf as at 13 December 2023.

It is important to note that the value of a Beneficiary's Client AuM set out in their Valuation Notice is not the amount that the Receivers propose to distribute to the Beneficiary from the Trust Assets.  Rather, it is a reference point from which the distribution to be paid to each Beneficiary will be calculated.  The way in which the distribution to each Beneficiary will be calculated will be explained in the explanatory memorandum.  As noted above, Beneficiaries and Corporate Trustees will have the opportunity to provide feedback and ask questions in relation to the proposed method of distribution during the consultation period.

After the identification process has been successfully undertaken, a notification will be issued to Beneficiaries providing them with a unique login to a secure, web-based portal where they will be able to view their Valuation Notice, once it is ready for release.  Beneficiaries will be able to review and approve, or dispute, their Valuation Notice via the web-based portal.  The September Orders have also established a process for dealing with any dispute by a Beneficiary or Corporate Trustee with respect to a Valuation Notice.

We will provide a separate circular to Beneficiaries and Corporate Trustees detailing the steps required to complete the verification of Beneficiaries' entitlements prior to issuing the unique login details to the web-based portal.

For further information in relation to the verification of Beneficiary entitlements, please refer to the Fourth Report at [3.4.27] - [3.4.34].

Link: Report dated 9 August 2024

Our update of 9 August 2024 informing Beneficiaries and Corporate Trustees of the Framework Application provided a copy of the original orders sought by the Receivers.  Not all of the orders contained in our minute of proposed orders were made by the Court on 2 September 2024, and some of them were held over for determination at the Explanatory Memorandum Application Hearing.

Those orders that his Honour wished to hold over related to:

• the consultation period allowing interested parties to provide feedback to the Receivers;

• the process for interested parties wishing to be heard by the Court on the Receivers' future application for the distribution of the Trust Assets to seek leave of the Court to do so; and

• filing and listing of the Receivers' future application for the distribution of the Trust Assets.

His Honour's view was that his decision on these matters should be deferred until after the Explanatory Memorandum Application Hearing when further information is available and the various workstreams that feed into that are further developed, including the Valuation Notices.

It is the Receivers' intention to work towards the indicative timeline set out in the Fourth Report at paragraphs [3.5.2] – [3.5.4] however, as highlighted in the Fourth Report, and recognised by his Honour's approach to deferring his decision in respect of certain matters, there are certain factors which may impact the Receivers’ ability to meet these dates and which are outside the Receivers’ control.

Link: Report dated 9 August 2024