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:
- ASIC provides regular updates on this matter on its Brite Advisors Key Matters page. contacted by email at Brite.Investigation@asic.gov.au.
- Information from the liquidators and receivers is available at https://www.mcgrathnicol.com/creditors/brite-advisors-pty-ltd/ or by email at firstname.lastname@example.org (this website says the information is only for creditors and shareholders).
Each question is clickable to expand to show the corresponding answer.
Frequently Asked Questions
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:
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).
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.
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.
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.
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.
As of February 2024, the latest findings from McGrathNicol, the appointed receivers and managers of Brite Advisors Pty Ltd, include several key points:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.