Australia’s corporate regulator has launched fresh court action over the collapse of the Shield and First Guardian funds, moves it says are aimed at holding gatekeepers to account for failures that left thousands of superannuation members exposed to heavy losses.
ASIC has filed Federal Court proceedings against advice licensee InterPrac Financial Planning and research house SQM Research, and is seeking leave to sue advice firm MWL Financial Services. InterPrac’s ASX-listed parent, Sequoia Financial Group, fell 12% before entering a trading halt following disclosure of the action.
The cases centre on how the two now-failed funds were marketed and approved. InterPrac was the principal licensee for advisers who recommended the schemes, including Venture Egg Financial Services and Reilly Financial. According to ASIC, those advice firms tipped the superannuation savings of 6,800 clients into Shield and First Guardian, with around $1 billion invested over roughly three years before both funds were placed into liquidation in the past year.
ASIC sues resaerch house
In a first for the regulator, ASIC has also sued a research house, alleging SQM issued favourable “investment-grade” ratings for the Shield fund despite scant information and no track record, enabling the products to appear on trustee platforms operated by Macquarie, Equity Trustees, Netwealth and Diversa.
“If you are going to put out a document that you know others are going to rely on… there is a significant obligation to do your homework,” ASIC deputy chair Sarah Court said, adding the watchdog is “absolutely worried” about research house practices, though not yet alleging a systemic problem.
SQM founder Louis Christopher said the firm is assessing the claim.
ASIC alleges SQM failed to obtain adequate information and overlooked inconsistencies when preparing its Shield reports. Against InterPrac, the regulator claims the licensee failed to ensure its former authorised representatives complied with best-interests obligations, lacked adequate risk management, and relied entirely on external research when adding Shield and First Guardian to its approved product list. ASIC also alleges InterPrac did not act when lead generators were used and permitted a “negative consent” process in which clients were switched into the funds unless they objected within seven days.
The enforcement push follows related actions in the investment chain: ASIC has sued Equity Trustees over its role in the Shield scandal and secured $321 million from Macquarie to repay investors. Court said the investigations are complex given “a string of players” involved, including advisers, trustees, research houses and auditors, and signalled further action is likely.
Significant losses to superannuation
The potential losses to super are significant. Shield investors may recover only 60–70 cents in the dollar, liquidators have estimated, while the outlook for First Guardian appears worse, with much of the money feared gone—allegedly diverted to directors’ projects and offshore. ASIC is seeking declarations and civil penalties against SQM and InterPrac and orders restraining InterPrac from carrying on a financial services business. The regulator is also seeking leave to proceed against MWL and Imperial Capital Group, a lead generator, for their roles in directing investors into Shield.
As the cases progress, thousands of Australians remain uncertain about the fate of their retirement savings.