What should I do with my Brite Advisor investments?

People with investments and cash with Brite Advisors Pty Ltd or their other entities (for example, Brite Advisors Hong Kong Limited, THE BRITE ADVISORS SA (PTY) LTD, Brite Advisors USA, Inc. ) may be wondering what to do with their pensions and investments. The main message from the liquidators and receivers is to direct messages through your trustee or product provider, if you are not aware of them you can contact the liquidators and receivers directly.

We have tried to answer financial planning questions to help trustees and individuals with questions. Information was updated on 21 February 2024.

As an expat financial adviser based and regulated in the UK this information is provided to assist any investor that may have questions.

Here are some resources that may be helpful:

Each question is clickable to expand to show the corresponding answer.

The information provided in this document is based on the interpretation of legal documents, court orders, and reports filed by McGrathNicol as receivers and managers of Brite Advisors Pty Ltd. While every effort has been made to ensure accuracy and clarity, interpretations may vary, and there may be nuances in the documents that require further legal or professional analysis. Recipients of this information should exercise caution and consider seeking independent legal or financial advice to clarify any specific questions or concerns they may have. Edale and its representatives cannot be held liable for any inaccuracies, omissions, or misinterpretations arising from the use of this information.

Frequently Asked Questions

What should I do about my Brite Advisor account?

In light of the situation involving Brite Advisors Pty Ltd being placed into liquidation and the suspension of transfers in or out of the platform, investors should consider taking the following steps:

  1. Stay Informed: Keep abreast of the latest developments and updates provided by regulatory authorities, such as the Australian Securities & Investment Commission (ASIC) and the Securities and Exchange Commission (SEC).

  2. Assess Options Carefully: While transfers away from the Brite platform are currently suspended, investors should carefully consider their options once the suspension is lifted. This may involve seeking alternative advisers or platforms, but caution is advised to avoid falling prey to unsuitable advisers looking to take advantage of the situation.

  3. Seek Professional Advice: Given the complexities surrounding QROPS, SIPPs, and other investment vehicles, it’s crucial for investors to seek professional financial and tax advice from qualified and regulated advisers. Local tax advice should be obtained before making any decisions, especially regarding transfers and potential tax implications.

  4. Review Investment Strategy: Take the opportunity to review your investment strategy in light of the current circumstances. Consider factors such as risk tolerance, investment objectives, and diversification to ensure your portfolio remains aligned with your financial goals.

  5. Monitor Progress: Keep track of the progress of the receivership process and any updates provided by relevant authorities. Stay vigilant for any communication from Brite Advisors or the appointed receivers regarding the status of your investments and any further actions required on your part.

By staying informed, seeking professional advice, and carefully evaluating their options, investors can navigate this challenging situation with greater confidence and protect their financial interests to the best of their ability.

What are the Key Updates from the Liquidation Process?
The latest update from McGrathNicol on the Brite Advisors Pty Ltd situation, as of February 2024, emphasizes ongoing discrepancies in investment valuations, with a significant variance identified between reported and verified client assets under management. Efforts to reconcile these differences continue, alongside the investigation into transactions involving related parties and the management of client assets
What protections are in place to protect client funds held by Brite Advisors?
To protect client funds held by Brite Advisors, the Court granted asset preservation orders, restricting any dealings with Brite Advisors’ assets, including client assets under management (AuM), without further court orders. These measures ensure that the Receivers are the only authorized persons to manage the assets during the receivership, safeguarding the investments for the benefit of the beneficiaries. This legal framework aims to maintain the integrity and security of client funds throughout the investigation and receivership process.
Who is involved and what are their roles?
The main parties involved are ASIC (Australian Securities and Investments Commission), which initiated the court action due to concerns about Brite Advisors’ financial management; McGrathNicol, with Linda Smith and Rob Kirman appointed as the Receivers to manage Brite Advisors’ assets and conduct investigations; and Brite Advisors itself, the company under investigation. ASIC is responsible for regulatory oversight, McGrathNicol’s Receivers handle the recovery and protection of assets, and Brite Advisors is the entity under scrutiny for its financial practices and management of client funds.
As an investor with Brite Advisors how am I classed?
You are a beneficiary. In the context of Brite Advisors and the receivership situation, “beneficiaries” refers to individuals or entities who have a vested interest in the funds or assets managed by Brite Advisors. These beneficiaries could include investors in pension schemes, superannuation funds, or other investment products offered by Brite Advisors. They are essentially the clients or investors whose money is being managed and for whom the receivers are working to secure and potentially recover assets.
What is the latest findings as at feb 2024?

As of February 2024, the latest findings from McGrathNicol, the appointed receivers and managers of Brite Advisors Pty Ltd, include several key points:

  1. Client AuM Variance: An initial report by the Receivers identified a variance of US$69.1 million between the client assets under management (Client AuM) reported on the Brite Advisors Salesforce platform and the verified Client AuM as of November 9, 2023. This variance remains unreconciled and is subject to further investigation and recovery.

  2. Return of Client AuM in IBHK Accounts: Approximately AU$129 million in Client AuM was divested from Brite Advisors' Interactive Brokers Australia (IBA) accounts into cash and transferred to an HSBC account in Hong Kong held by Brite Hong Kong Limited (Brite HK). Orders from the Court required the return of these funds to Brite Advisors' IBA accounts, with AU$115.8 million returned in December 2023. The directors have not provided a full accounting for these funds while in the custody of Brite HK.

  3. Related Party Transactions: Investigations indicate that net funds of approximately $91.4 million have been advanced to multiple related parties of Brite Advisors since FY16. These transactions primarily involve payments of expenses and liabilities of related entities and transfers of cash recorded through a related party loan account. The nature of these payments to related entities is under further investigation.

  4. Interactive Brokers Credit Facility: Funds totaling US$5 million were paid from Brite Advisors' accounts in partial repayment of the US$10 million IB Credit Facility, of which Brite Advisors is a Guarantor. Additionally, interest payments totaling US$1.4 million were paid from Brite Advisors' accounts in respect of the IB Credit Facility.

  5. Acquisition Investigations: The Receivers have identified several acquisitions made by members of the Brite Group since 2018. Investigations suggest that payments for at least 10 acquisitions may have been made from Client AuM or funds borrowed using Client AuM as security. Further examination is ongoing to determine any claims by Brite Advisors and/or the underlying beneficiaries in respect of these acquisitions.

  6. Further Investigations into Property: The Receivers have identified an additional 59 over-the-counter assets listed in AutoRek, not held in IBA accounts. Communication with third parties is underway to determine the scope of these assets within the Receivers' appointment.

These findings highlight the ongoing complexity and scope of the receivership process, as McGrathNicol continues to investigate and manage the affairs of Brite Advisors in accordance with the Court Orders and regulatory requirements.

What happens if there is a deficiency in the funds, and not all beneficiaries can be fully compensated?
If there is a deficiency in the funds and not all beneficiaries can be fully compensated, the Receivers will distribute the available assets according to legal priorities and the directives provided by the court. This process typically involves a pro-rata distribution where each beneficiary receives a portion of their investment based on the available funds. The specific approach to handling deficiencies and compensations will be determined by the Receivers and may be subject to court approval to ensure fairness and compliance with legal requirements.
Can I switch my investment or pension scheme to another provider during this process?
During the receivership process, the ability to switch your investment or pension scheme to another provider may be significantly restricted, especially if your assets are subject to court orders or if the Receivers have imposed specific controls over withdrawals and transfers. Generally, such actions require approval from the Receivers, who are acting to preserve and protect assets according to the court’s directives. It’s best to directly contact the Receivers for specific guidance based on your situation and any legal constraints in place.
How much money is missing from client accounts?
The Receivers’ initial report identified a variance of approximately US$69.1 million between the client assets under management (AuM) reported on the Brite Advisor Salesforce platform and the verified client AuM as of 9 November 2023. This discrepancy, representing about a 10% variance from available records at the time, is under further investigation to reconcile the reported figures with the actual holdings.
Are there any other financial discrepancies?
Yes, the Receivers identified several financial discrepancies in addition to the variance in client AuM. These include net funds of approximately $91.4 million advanced to related parties of Brite Advisors since FY16, transactions that are under further investigation. There were also payments related to an Interactive Brokers (IB) Credit Facility, including a partial repayment of US$5 million and interest payments totaling US$1.4 million, which were paid from Brite Advisors’ accounts. Additionally, several acquisitions made by members of the Brite Group are suspected to have been funded using Client AuM or loans secured against it.
What is the withdrawal process?

The withdrawal process, as outlined by the Receivers, involves beneficiaries submitting requests through their pension scheme administrators or directly to the Receivers if no administrator is involved. Withdrawals must not reduce the beneficiaries’ total investment value below a certain threshold and must have been regular withdrawals as of a specified date. The Receivers assess requests based on these criteria, and full surrenders or lump sum withdrawals outside of these conditions are not considered. This ensures that withdrawals align with legal and financial guidelines set forth by the court.

What is the timeline of events?

Here's a concise timeline based on the provided information:

  • October 2023: ASIC commences court action against Brite Advisors due to concerns about the unknown financial position and unreported value of client funds under management.
  • 2 November 2023: Brite files its financial statements for the year ended 30 June 2022, which are subject to a qualified opinion regarding the funds under management.
  • 13 December 2023: Court appoints Linda Smith and Robert Kirman from McGrathNicol as receivers following a hearing that revealed discrepancies in reported client funds.
  • 22 January 2024: ASIC files an application to wind up Brite and appoint the receivers as liquidators, with a hearing scheduled for 6 February 2024.

This timeline highlights the key legal actions and developments leading up to the potential winding up of Brite Advisors.

What corporate trustees are linked?

Based on conversations with clients and some public domain research we believe the members are likely to be linked to pensions, QROPS, etc with some of the following corporate trustees:

  • STM Malta Pension Services Limited

Each of these trustees should be able to proviude you with information. We shall update this list as we learn more.

Are current valuations accurate and can I get an updated valuation?

The current valuations of Brite Advisor investments have been identified to have significant discrepancies. A US$69.1 million variance between the client assets under management (Client AuM) reported on the Brite Advisor Salesforce platform and the verified Client AuM as of November 9, 2023, has been discovered. This discrepancy has not been reconciled yet due to several challenges:

  • Beneficiary positions disclosed on Salesforce may not accurately reflect the actual underlying investments held by Brite Advisors or the amounts outstanding to Interactive Brokers Australia (IBA), where Client AuM has been used as security.
  • Incomplete information has been provided by the Directors regarding certain assets, including Client AuM not held by IBA.
  • Corporate Trustees have not been able to advise on amounts owing to underlying beneficiaries, necessitating a thorough reconciliation at the beneficiary level, which has not occurred due to incomplete contact details for beneficiaries.
  • Access to data systems has been constrained, particularly access to the Salesforce system, which the Receivers are in the final stages of negotiating. These constraints have hampered detailed investigations and reconciliations.

Given these challenges, accurate and updated valuations are not currently available. The Receivers are working towards gaining access to necessary information and systems, including Salesforce, to conduct detailed investigations and reconciliations. Once these are completed, more accurate valuations can be provided. Beneficiaries are advised to stay updated through communications from the Receivers and McGrathNicol for any developments regarding valuations​​.

Can creditors of Brite Advisors make a claim on the investment assets?
No, creditors of Brite Advisors cannot make a claim on the investment assets managed on behalf of beneficiaries. The Trust Assets, which include client assets under management (AuM), are subject to the Receivers’ appointment and are specifically protected from being distributed to the general creditors of Brite Advisors. The liquidation process for Brite Advisors addresses only the assets and liabilities that the company holds in its own right, not those it holds in any trustee capacity. Therefore, the client AuM, or any assets held in trust, cannot be used to satisfy claims by non-trust creditors. This legal structure ensures that the assets managed on behalf of beneficiaries are safeguarded from claims by Brite Advisors’ general creditors, emphasizing the separation between company assets and client-managed funds​​.
What happened in the Court Hearing in February?
During the court hearing on February 6, 2024, significant orders were made by Justice O’Sullivan in Adelaide, affecting the proceedings surrounding Brite Advisors Pty Ltd. The court vacated paragraph 1 of the orders made on December 13, 2023, and made amendments to ensure that Linda Smith and Robert Kirman of McGrath Nicol, as the appointed Liquidators and Receivers, could perform necessary actions without being hindered by previous orders. Notably, the court ordered the defendant, Brite Advisors, to pay ASIC’s costs, either as agreed upon or as taxed. This hearing marked a pivotal moment, as on this date, the First Receivership effectively ceased, transitioning Linda Smith and Rob Kirman into their roles as joint and several Liquidators of Brite Advisors, following an application to wind up Brite Advisors on just and equitable grounds. Additionally, they continued as joint and several Receivers and Managers of the property assets and undertakings held on Trust by Brite Advisors, but with broader powers than in the First Receivership, as authorized by the court orders made in proceeding WAD 13 of 2024 and WAD 262 of 2024. These decisions are part of the ongoing legal and administrative process to manage and resolve the complexities surrounding Brite Advisors Pty Ltd, aiming to protect the interests of the beneficiaries and ensure the lawful and orderly disposition of assets​​.
Will the orders in the latest Court Case allow me to do a transfer?
The court orders issued on 6 February 2024 provide a framework for the management and distribution of Trust Assets by the Receivers but do not specifically address individual beneficiary transfers directly. The court has authorized the Receivers to take possession of, preserve, maintain, and sell Trust Assets. Additionally, the Receivers are granted the power to do all things necessary for the realization of Trust Assets, subject to further court orders. This means that while the Receivers have broad authority to manage the Trust Assets, any action such as transferring assets to individual beneficiaries would likely require compliance with the Receivers’ protocols and possibly further court approval, especially if it involves distribution or reallocation of assets.
What will need to happen before I can access my money?

Before beneficiaries can access their money, several critical steps must be undertaken by the Receivers and Liquidators, as outlined in the court orders and the ongoing management strategy for Brite Advisors Pty Ltd. These steps include:

  1. Reconciliation of Client Assets: The Receivers are working to reconcile the significant variance between the reported and verified client assets under management (Client AuM). This process is complex due to challenges like commingled accounts, lack of clear information on beneficiary entitlements, and restricted access to critical data systems, including Salesforce. Accurate reconciliation is crucial for determining the exact amount of assets available for distribution.

  2. Recovery of Assets: The Receivers are actively investigating and attempting to recover Trust Assets, including exploring recovery actions against related parties and other entities where funds may have been transferred inappropriately. This includes funds transferred to Hong Kong and any discrepancies in the funds returned. The goal is to recover as much of the assets as possible to maximize the returns to beneficiaries.

  3. Court Approval for Distribution Strategy: Any strategy for returning Client AuM to beneficiaries must be approved by the court. This includes the method of distribution, how to handle any gains or losses on the Client AuM since the receivership began, and the treatment of interest accruals and distributions on securities. The Receivers must also navigate the complexities of the US$69 million variance in Client AuM.

  4. Processing Withdrawals: Currently, the Receivers are assessing and processing regular superannuation and pension withdrawals that were in place as of November 9, 2023. Any requests for withdrawals beyond those pre-established arrangements require careful consideration to ensure they do not exceed certain thresholds and are in compliance with the court orders.

  5. Legal and Regulatory Compliance: Throughout this process, the Receivers must ensure that all actions taken are in full compliance with legal and regulatory requirements, including those set forth by ASIC and the Federal Court of Australia. This includes the proper management and protection of Trust Assets, adherence to asset preservation orders, and conducting the business of Brite Advisors in a manner that safeguards the interests of the beneficiaries.

Beneficiaries should stay informed through updates provided by the Receivers and Liquidators and may need to demonstrate patience as these steps are meticulously carried out to ensure the fair and legal distribution of assets.

I have an old statement can someone give me guidance on the assets I hold?

If you have an old statement and need guidance on the assets you hold Edale may be able to assist you with getting data from our investment market database to see how readlity realisable these assets are in any sale and possible current market value. However, we would emphasise the critically important information from the Receivers and Liquidators.

Important considerations to consider when seeking a current valuation of your portfolio/account:

  • The Receivers and Liquidators of Brite Advisors Pty Ltd are working to reconcile the significant variance between the reported and verified client assets under management (Client AuM) as identified in their investigations.
  • Calculating beneficiary ownership and value of assets has been complicated by issues such as commingled accounts, incomplete information on beneficiary entitlements, and limited access to critical data systems, including Salesforce.
  • The Receivers are in the final stages of negotiating access to Salesforce, which will aid in providing more accurate and detailed investigations and reconciliations.
  • The Receivers and Liquidators of Brite Advisors have been authorized by the court to manage and, if necessary, sell the Trust Assets in order to manage the receivership effectively and ultimately return assets to the beneficiaries. According to the court orders:

    • Realisation or Attempted Realisation of the Trust Assets: The Receivers are authorized to take possession of, preserve, maintain, and sell the Trust Assets. This includes doing all things necessary for the realisation of the Trust Assets, such as signing any documents required for this purpose (Federal Court of Australia Act 1976 (Cth), s 57; Federal Court Rules 2011 (Cth), rr 14.21, 14.22).

    • Distribution of Proceeds: After the realisation of assets, the Receivers are tasked with distributing any proceeds to meet the claims of creditors or persons whose debts were incurred in relation to the trusts. This distribution is to be conducted according to the legal and court-ordered priorities and processes (paragraphs 8(viii) and 8(ix)).

    • Limitations and Priorities: The Receivers must adhere to the court orders and directions in managing, realising, and distributing the Trust Assets. This includes not distributing any Trust Assets or any part of them to or for the benefit of any person asserting a claim to the Trust Assets, including the underlying individual beneficiaries, until further direction or order of the Court (paragraph 11).

  • Any forced sale of positions may result in underlying funds, assets, and securities being impacted by the market liquidity of their own financial instruments and the markets they operate in. The theoretical implications of such a scenario underscore the importance of carefully managed asset liquidation processes by the Receivers and Liquidators to mitigate market impact and preserve value for the beneficiaries. Some of the challenges of mass redemption for specific on the asset class is outlined below:
    • Funds (Mutual Funds, ETFs, etc.): A mass sale of fund units could lead to significant redemption pressures on the fund managers. This could force fund managers to sell underlying assets at unfavorable prices to meet redemption requests, potentially leading to a decrease in the fund's net asset value (NAV) and impacting remaining investors.

    • Structured Notes: These are complex financial instruments whose liquidity is often lower than that of more straightforward securities like equities or bonds. A mass sale could exacerbate liquidity issues, widening bid-ask spreads, and potentially leading to sales at prices significantly below the notes' theoretical value.

    • Equities: While large-cap stocks might absorb selling pressure better due to their liquidity, a mass sale could still lead to price declines, especially if the sale is rapid and voluminous. For small to mid-cap stocks, which typically have lower liquidity, the impact could be more pronounced, with significant price drops and volatility.

    • Bonds: The bond market, especially for corporate and high-yield bonds, can experience liquidity challenges. A mass sale could lead to wider spreads between bid and ask prices and force sellers to accept lower prices. For bonds with lower credit ratings, the impact could be even more significant, affecting both price and liquidity.

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