Speaking on the first day of the Financial Advice Association Australia Congress in Perth on Tuesday, CEO Sarah Abood made it clear that the bulk of the blame for the Shield and First Guardian collapses needs to be directed squarely at the funds, not financial advisers.
“Financial advisers didn’t set up these funds, and they didn’t cause their collapse,” she said, adding that the “directors and investors, the conflicts of interest and related party deals – potentially, the outright fraud” were far greater factors.
“In fact, one of the notable features about this case is the multiple failures involved across all stages of the value chain. ASIC has disclosed that it is investigating a total of 140 individuals and entities in relation to this collapse, across a range of different players.
“That includes the funds and investments of course, the responsible entities, the auditors, the platforms and super funds, the research house, the cold calling firms – and advisers and licensees.”
However, Abood acknowledged that while it came from just a small number of what she termed “rogue advisers”, poor advice did play a role in the collapse.
“Just five financial advice licensees have been implicated in this matter by ASIC. Of those five, four no longer operate. And on Thursday last week, ASIC launched civil proceedings against the last licensee still standing – InterPrac,” she said.
“ASIC have alleged that this single group oversaw 6,843 clients investing over $677 million into these products. Interprac and its owner Sequoia are defending ASIC’s allegations and no doubt there will be plenty more allegations and evidence to play out in court.”
Questioning how so much damage could be wrought by such a small number of individuals, Abood said that it “certainly looks like underlying this complex matter could be something quite simple”.
The answer, she said, could be “simple greed”.
“It beggars belief that so many people and so much money was funnelled into these unknown products so quickly, without some substantial incentive,” Abood said.
“We don’t yet know whether it was the individual advisers, or just the leadership of the businesses that were involved. But ASIC has alleged that over $19 million in marketing payments were made to InterPrac-licensed entities Venture Egg and Financial Services Group Australia, businesses controlled by Ferras Merhi – who is also being sued by ASIC in this matter.
“If that’s the case then these payments are already illegal. Conflicted remuneration was banned under the FOFA reforms from 1 July 2013 – more than a decade ago.
“It looks like our challenge here is not changing the law, it’s getting better at detecting breaches, and faster at enforcement.”
ASIC deputy chair Sarah Court said InterPrac’s “alleged oversight and compliance failures exposed thousands of Australians to poor advice and significant financial risk”.
“We allege Interprac failed to ensure certain authorised representatives acted in their clients’ best interests, contributing to hundreds of millions of dollars of superannuation being invested in products that were unsuitable, high risk and costly,” Court said last week.
“We allege that no competent financial adviser could have recommended Australians invest large amounts of their superannuation in these funds, and that Interprac – as licensee – should have been alert and responsive to the significant risk this conduct posed to clients, but it failed on many levels.”
InterPrac parent company Sequoia has since signalled its intention to “vigorously” defend the allegations of wrongdoing.
“ASIC’s statement of claim concerns historical conduct involving certain former authorised representatives and their recommendations for clients to invest in the Shield Master Fund and First Guardian Master Fund via approved superannuation platforms,” the firm said in an ASX filing last week.
“These representatives ceased to be authorised by InterPrac during 2025. The proceedings seek civil penalties in relation to alleged conduct in relation to such matters.”
Following the court action, both Macquarie and Netwealth have informed InterPrac that the platforms will no longer accept new business from any of the licensee’s advisers.
In a statement to ifa, an InterPrac spokesperson confirmed that it had received correspondence from Macquarie and Netwealth advising of their intention to “cease permitting new business recommendation and distribution of their products and services by InterPrac and its associated companies from mid-January 2026”.
“All existing business is unaltered,” they said.
The big dealer groups have always looked the other way for advisers writing lots of business. Nothing new in that regard!
I’m struggling to accept the statement that “we don’t yet know whether it was the individual advisers or just the leadership involved.”
It’s common knowledge that directors did not disclose payments to staff or salaried advisers.
It’s also well established that the inclusion of the Shield Master Fund and First Guardian funds was determined by an Investment Committee—an area where most salaried advisers had no seat at the table yet were consistently assured that the committee’s process was thorough and robust, and there was an expectation to follow those directions or risk losing PI coverage.
We also know that Shield and First Guardian, based on their PDS and TMD, met the stated criteria for inclusion—either as standalone options (diversified funds) or within satellite allocations of a constructed portfolio.
And of course, it is well known that the PDSs were later alleged to contain misleading or inaccurate information.
Given all of this, I would genuinely like to know how many advisers were actually notified—by ASIC, the Trustees, the FAAA, or the platforms—of the issues that were known before these funds were frozen.
How many times was section 601FF used?
The financial markets performed well in the last 2 years yet these funds have failed. We should know by now why that is the case. No one has called it fraud. Why not?
There have clearly been failings across multiple parts of the industry, yet advisers always seem to be the first to be thrown under the bus. Meanwhile, the clients who have actually lost money risk being forgotten in the noise. Their recovery—and any compensation they may be entitled to—should be front and centre. It’s only fair that they remain the priority.
$1.5 billion has been directed to Ukraine to defend itself, including more than $1.3 billion in military support. Just saying…..
We know how many times ASICs powers under s601FF have been used… ZERO
2025FY: 0
2024 FY: 0
Section 19s though:
2025FY: 1244
2024 FY: 824
There are 100% innocent advisers who ASIC will want to ban to make them look like they are doing something about it when they did nothing.
Absolutely well said, I couldn’t have said it better.
Maybe the headline should read, “Abood says sector-wide involvement in failed funds down to ASIC incompetence.” If only they (ASIC) had have acted on earlier tip-offs. Just like Dixon’s and others, it’s been a failure from the regulator.
FAAA’s response is far greater than the AIOFP’s where the AIOFP keep providing unconditional support to Interprac/Sequoia who DO NOT deserve ANY support from the rank & file members of this association (even though AIOFP management believe otherwise. I will certainly be reviewing my AIOFP membership at next renewal.
How many of these participants were members of the FAAA or some other association?