THE AUSTRALIAN Securities and Investments Commission has not been able to make any public disclosure about its legal case against two of the most successful investment managers in the Australian market, despite filing charges against them last week and following up yesterday with an urgent interim stop order.

The order forced Trio Capital – until recently known as Astarra Capital – to remove product disclosure statements for its Astarra Managed Funds, with a combined $1 billion under management, from its website.

The Astarra funds, some of which are rated as five-star by Morningstar and are actively marketed to financial planners, had been 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 last November while most funds struggled to break even.

The product disclosure statements were removed a week after ASIC separately filed charges against two of the former investment managers of Astarra’s funds, Shawn Richard and Eugene Liu, in the equities division of the NSW Supreme Court. ASIC has made no public disclosure about that case under the direction of the judge.

Mr Richard, 34, originally from Canada, and Mr Liu, 32, originally from the US, were the founders of the Sydney fund Astarra Strategic – until recently called the Alpha Strategic Fund – a $118 million hedge fund-of-funds which 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 had granted the investment management company run by Mr Richard and Mr Liu – once called Absolute Alpha but recently renamed Astarra Asset Management in July – an exemption from the Anti-Money Laundering and Counter-Terrorism Financing Act. That meant Absolute Alpha did not need to verify the identity of its customers or to report certain transactions to the regulator.

The Strategic Fund allowed retail investors with as little as $1000 to invest in the complex hedge fund-of-funds product and had reported only three months of negative returns – including a 1.24 per cent fall in September last year and a 1.76 per cent fall in October last year – since its inception in 2005. Financial planners were entitled to a commission of up to 4 per cent after tipping their clients into the Strategic Fund.

Margin lenders would allow clients to borrow against their holding. For example, Westpac listing 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 this year. The Hong Kong branch of Standard Chartered, said to be the custodian of the assets in the British Virgin Islands, would neither confirm nor deny 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 had never disclosed the names of any of the hedge funds in which it invested in its monthly updates to investors, instead focusing on vague aspects of its investment strategy.

The fund has not provided any update on its performance since the end of June, whereas the Balanced, Growth and Conservative funds’s performance until the end of last month 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 Ltd, 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. In Trio’s latest financial accounts, filed on September 30, the company revealed it had under legal advice lodged a statutory demand on the former directors of an appointed investment manager on September 25.

Trio provided no information as to why it had lodged the statutory demand.

A copy of the interim stop order that forced Trio to remove the Astarra product disclosure statements from its websites yesterday was not available.

But the section of the Corporations Act referred to 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”.

The Titanium Retirement Fund, which also has Trio as a responsible entity, has removed its product disclosure statement as well.

The interim order lasts for 21 days. In the meantime, links to the product disclosure statements on the Astarra website instead carry this statement: ”Trio Capital Limited … for the Astarra Managed Funds wishes to advise that the Astarra Managed Funds Product Disclosure Statement is currently under review and is not currently open for investment.”