Brite Advisors Pty Ltd
Frequently Asked Questions
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The Receivers’ investigations remain ongoing. Please continue to check this page for updates. The Receivers can be contacted by email: briteadvisors@mcgrathnicol.com
1. What is the status of the Receivers’ investigations to date?
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. Link: Report dated 24 January 2024
Before commencing any recovery action, the Receivers will consider the merits of the action and decide whether it would be commercially viable to do so (i.e. likely produce a benefit for Beneficiaries, having regard to factors such as cost of proceedings, prospects of recovery, etc).
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.
Given the complexity and size of Brite Advisors' business operations, it is expected that it will take some time before the Receivers will be able to conclude their investigations.
Another key focus of investigation as the Receivers work towards formulating a strategy of return to Beneficiaries are matters relating to the Client Assets under Management (Client AuM), including but not limited to:
the variance between the Client AuM held and the total reported Beneficiary liability position;
the operation of Interactive Brokers Australia (IBA) Accounts and the IB Credit Facilities (including the margin loans owing by Brite Advisors to IBA); and
the comingling of Beneficiary funds.
The Receivers will provide updates to beneficiaries as and when available and appropriate to do so.
2. Where can I find further information about the Receivers’ investigations and suspected offences the Receivers were asked to report on?
Please refer to section 8 of the Receivers' report to the Court dated 24 January 2024.
3. What actions will be taken against the directors and related parties with respect to any identified misconduct?
Liquidators 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 are working closely with ASIC and will continue to keep ASIC updated as to the status of their investigations.
The Receivers and Liquidators also have power to commence civil proceedings against directors and officers on behalf of Brite Advisors in respect of any breaches of directors' and officers' duties, with a view to recovering compensation to increase the funds available to Beneficiaries and creditors of Brite Advisors.
4. How are the Receivers being paid for the work they are doing?
The Court Orders made on 21 December 2023 provided that 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.
5. Why have both Receivers and Liquidators been appointed? What’s the difference?
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 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, if you are a Beneficiary with an interest in the Client AuM which is in control of the Receivers. 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
6. How has the variance in the Client AuM occurred, how can I obtain more information about this?
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.
7. What are the next steps in the Receivership? How long will it take?
Following the appointment of the Interim Fund Manager to protect and manage the Client AuM, the Receivers' key focus will be to develop a proposal for an equitable and fair solution to distribute the Client AuM back to beneficiaries.
Noting the variance in the Client AuM, together with deficiencies in the records available, this will not be a straightforward process and the Receivers will be required to seek directions and approval from the Court before any distribution proposal can be implemented. Any party with a sufficient interest in the subject matter (which includes beneficiaries) will be entitled to be heard by the Court on the Receivers' proposal and notice will be given to beneficiaries when the Receivers file their application to the Court for approval of their proposal.
The Receivers are not currently able to provide an estimate of the timeframe this will likely involve, however, will keep beneficiaries informed as the matter progresses. The Receivers are working to develop their proposal as quickly as possible.
8. Will the Receivers be able to make an interim distribution to beneficiaries so a portion of my investment can be returned?
The Receivers are considering the possibility of an interim distribution to Beneficiaries as part of their distribution proposal.
9. Will I get all my money back? When?
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 9 November 2023. Put another way, approximately 90% of Client AuM historically reported as being held by Brite Advisors has been located, secured and 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:
the ongoing management of Client AuM;
further investigations into the variance in Client AuM;
verification of amounts owing to individual Beneficiaries; and
ultimate distribution of funds to individual Beneficiaries.
These steps will take some time to work through.
Once the Receivers have worked through these complex issues, including obtaining any further guidance from the Court with respect to these issues, the Receivers will be better able to estimate a timeline for the return of Client AuM to beneficiaries.
10. What about the existing Client AuM? How is this being managed?
The Client AuM predominantly remains in accounts with Interactive Brokers, 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:
monitoring the Client AuM;
providing recommendations to the Receivers on steps appropriate to manage risk and adherence to the applicable investment portfolio mandates; and
upon the instructions of the Receivers only, trade the Client AuM as needed to achieve this.
The Interim Fund Manager's appointment will 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 Receivers are in the process of engaging BML Funds Management Pty Ltd as the Interim Fund Manager. 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.
Link: Court Order 6 March 2024
11. Can beneficiaries or Corporate Trustees provide trading instructions directly to or contact the Interim Fund Manager?
No, the Interim Fund Manager will be managing the model portfolios on an aggregate basis in accordance with the 6 March 2024 Orders at the instruction of the Receivers.
Link: Court Order 6 March 2024
12. Will individual trade requests be considered?
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.
The Court made orders on 27 March 2024 confirming that the Receivers are justified in refusing to act on specific trading instructions from any third party.
13. Is the existing Client AuM safe? What protections are in place?
The Court has made Asset Preservation Orders and other Court Orders to protect the Client AuM whilst work is being undertaken to:
quantify and reconcile Client AuM losses, and
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.
14. Are the Client AuM Segregated?
The Receivers’ investigations indicate that Brite Advisors’ Interactive Brokers accounts were held in the name of Brite Advisors in an omnibus structure, meaning there was no legal segregation or separation of funds within each Interactive Brokers account.
As such, the Receivers’ investigations indicate that the variance in the Client AuM is not attributable to any particular group of beneficiaries (for example, those located in any jurisdiction).
The Receivers are in the process of reconciling the Client AuM with a view to ascertaining the quantum and nature of the Beneficiaries' claims to the Client AuM.
Whilst investigations are ongoing, the Receivers have not been provided with any evidence supporting the view, and do not believe that the Brite Advisors USA Inc (Brite US) investor funds (or any other investor group's funds) are segregated in a manner that puts those investments beyond the impact of the identified material variance in Client AuM.
15. Can the Receivers provide me with an updated investment statement?
The Receivers are unable to provide individual investment valuations at this time for several reasons, including the variance in the Client AuM, the comingled nature of Client AuM held by Brite Advisors and limited company records and access to Brite Advisors’ systems.
As such, neither an accurate valuation nor reconciliation of the variance to the individual Beneficiary level can be provided. Any valuations that you have received are not authorised by the Receivers.
16. Can I withdraw funds?
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 30% of the recorded value of their investment as at 9 November 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.
17. Can I transfer all my money to another fund?
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.
18. Can I appoint a new Financial Advisor?
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.
19. I am a direct investor with no Corporate Trustee, can I still make a pension withdrawal request?
Yes, beneficiaries with no Corporate Trustee wishing to request a pension withdrawal should contact the Receivers office directly at briteadvisors@mcgrathnicol.com.
20. I don’t think I meet the pension withdrawal criteria, however, I am experiencing financial hardship, can the Receivers help me access my investments?
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.