Insolvent unit trusts in Australia

The Australian unit trust industry recently experienced financial difficulties. The formal legal process of handling those difficulties has revealed gaps in the Australian regulatory map.

This article highlights some of those problems and the Government's response to them.

Background

It is not yet clear whether the sector's current problems arise from the GFC or whether (and to what degree) they are the result of purely domestic factors. In respect of the latter issue, it is possibly relevant that Australia has, since the mid-1980s, been moving its retirement incomes policy from a largely State-funded one to one in which retirees are encouraged to fund their own retirement, with the state's resources being reserved for a social safety net. The result has been a significant expansion of retail (or "Mum and Dad") investment activity, either directly or through the medium of private sector pension funds.