THE AUSTRALIAN Securities and Investments Commission yesterday issued an urgent interim stop order forcing Trio Capital – until recently known as Astarra Capital – to remove the product disclosure statements for its Astarra Managed Funds from its website. Astarra Managed Funds has a combined $1 billion under management.

The order follows charges filed last week by the regulator against Astarra managers Shawn Richard and Eugene Liu. ASIC has made no public disclosure about that case – including the fact that it was filed – under the direction of a NSW Supreme Court judge.

The Astarra funds, some of which are rated as five-star by Morningstar and are actively marketed to financial planners, was among the top-performing funds during the depths of the financial crisis at the end of last year. The Alpha Strategic Fund delivered 11.67 per cent over three years to November 2008, a period when most funds struggled to break even.

Mr Richard, 34, originally from Canada and Mr Liu, 32, originally from the US, were the founders of the Sydney-based Astarra Strategic Fund – until recently called the Alpha Strategic Fund – a $118 million hedge fund that operated under a structure that held its assets through an entity in the British Virgin Islands. Its size had tripled in the year to June 30.

Austrac (the Government’s Transaction Reports and Analysis Centre) had granted the investment management company run by Mr Richard and Mr Liu an exemption from all sections of the Anti-Money Laundering and Counter-Terrorism Financing Act.

That meant the company did not need to verify the identity of its customers or report certain transactions.

The Astarra Strategic Fund allowed retail investors with as little as $1000 to invest in the complex hedge fund-of-funds product, which had reported only three months of negative returns since its inception in 2005. Financial planners were entitled to a commission of up to 4 per cent up front after tipping their clients into the fund.

Margin lenders would allow clients to borrow against their holding. For example, Westpac listed a maximum loan-to-valuation ratio of 60 per cent on the Strategic Fund in September.

ANZ was the original custodian of the fund, but custody was transferred to NAB’s National Australia Trustees (NAT) unit earlier this year. The Hong Kong branch of Standard Chartered, said to be the custodian of the assets in the British Virgin Islands, would not confirm or deny whether it had custody of the funds. The more conservative of the Astarra funds rated five-star by Morningstar, including the Astarra Balanced Fund, the Astarra Growth Fund and the Australia Conservative Fund, had invested in the Strategic Fund to varying degrees.

However, they also disclosed investments in other well-known Australian funds, including the likes of AMP Capital Investors and Ausbil Dexia.

Mr Richard and Mr Liu did not serve as the investment managers of the more conservative funds until July.

The Strategic Fund has not provided any update on its performance since the end of June, whereas the Balanced, Growth and Conservative funds’ performance until the end of September is available on the Astarra website.

The curious structure of the Strategic Fund, including a so-called ”deferred purchase agreement” was said to be prepared for tax reasons. Macquarie and AMP have similar structures on some of their funds, but make clear that the deferred purchase agreement involves reputable managers.

For example, in the case of the Macquarie Winton Global Opportunities Trust, the securities held by the Cayman Islands special-purpose vehicle are guaranteed by Goldman Sachs.

The Strategic Fund made no such disclosure, noting simply that the British Virgin Islands entity EMA International was a special-purpose vehicle and there was counter-party risk if EMA became insolvent or failed to comply with the obligations of its agreement.

The nature of ASIC’s complaint against Mr Richard and Mr Liu is unclear, because the judge in the case has barred the corporate regulator from releasing any details to media. A directions hearing is scheduled for November 9.

Mr Richard and Mr Liu are also believed to be the target of legal action by Trio, which was the responsible entity for the funds managed by the pair.

Neither was present in Astarra Asset Management’s office in the Sydney CBD when BusinessDay visited yesterday, and Mr Richard did not respond to requests to comment.

In Trio’s latest financial accounts, filed on September 30, the Albury-based company revealed it had, under legal advice, lodged a statutory demand on the former directors of an appointed investment manager on September 25.

Trio said that if the action was successful, it expected to recoup up to $400,000 – less legal costs – but Trio provided no information as to why it had lodged the statutory demand.

Rex Philpott, the chief executive of Trio, did not return repeated phone calls yesterday.

A copy of the interim stop order that forced Trio to remove the Astarra product disclosure statements from its websites yesterday was not available, and ASIC would not provide any comment.

But the section of the Corporations Act referenced shows that the order was made so urgently that ASIC felt any delay – such as to hold a hearing – would be ”prejudicial to the public interest”.