ASIC hit the ground running to kick off the new financial year, having already announced the cancellation of two advice firms’ Australian Financial Services Licenses (AFSL) for failing to pay industry funding levies, a Federal Court win that saw a former wealth firm director convicted of contempt of court, and travel bans against Falcon Capital directors.
The latter is part of the corporate regulator’s ongoing investigation into the collapse of the First Guardian Master Fund (of which Falcon is the responsible entity) and the Keystone Asset Management’s Shield Master Fund.
While First Guardian and Shield were not under the same management, there are a number of similarities in the conduct that drove investment into the funds – as well as the involvement of a handful of financial advice firms.
The long and short of it, as far as the investigations have led so far, is that superannuation comparison services utilised a raft of high-pressure sales tactics to funnel unsuspecting Australians into these firms, which subsequently advised the clients to roll their super into a self-managed super fund (SMSF) or super platform and invest the vast majority of their assets into Shield or First Guardian.
Despite ASIC taking significant action in these cases – everything from asset freezes and travel bans to AFSL cancellations and even a raid here and there – so far it hasn’t banned a single financial adviser.
However, according to ASIC deputy chair Sarah Court, that is set to change and announcements could be on the way before the end of the week.
“We’re also looking at adviser bannings, and those are currently underway, and you’ll be seeing more about that in the next day or two,” Court told a media briefing on Wednesday.
While she noted that the regulator is limited in terms of the information it can disclose given the ongoing investigations, the “whole area of exploitation” remains an important focus.
“Our primary aim here in the enforcement work that we’re taking is, at least at the outset, to preserve any assets that remain in the schemes so that they can be realised to the extent that they are available for the benefit of the consumers, while we continue our investigative work,” Court said.
“We’ve really invested heavily in these matters, and we have diverted a number of resources from other important projects.”
Importantly, she noted, the investigations are looking at the entire chain, including conduct of the lead generators, the financial advisers, the superannuation platforms, “who we think have a real role here”, and the research houses that “listed these funds as investable”.
‘Industrial scale’
Earlier this year, ASIC chair Joe Longo described the investigations related to Shield in particular as “among the most complex that ASIC is undertaking at the moment”.
At the same time, Court described the models involved in funnelling money into the funds as being on an “industrial scale”, which is a term the regulator has continued to utilise over the ensuing months.
On Wednesday, she said it is not a phrase she uses “lightly”, but the methods used fit the bill.
“What we’re seeing here is consumers or investors that are being contacted in some way or other by what we call, broadly, lead generators,” Court said.
“They’re not financial advisers, per se, but they are effectively operating like call centres with a script and with the job of enticing these investors into the web.”
She added: “There’s the lead generator, then you’ve got the adviser, then you’ve got the fund, and all of the challenges and what we think is misconduct associated with the fund that is sitting on a trustee platform, like a Macquarie or Equity Trustees.
“All of those people are taking money, getting commission, payments, incentive payments or misconduct.”
As ASIC looks into the entire chain, Court said the regulator is trying to understand whether or not it can hold the lead generators to account.
However, ultimately, she said, “financial advisers are the one that are the ones that are providing the advice to people to say you should roll your funds out into something like a Shield or a First Guardian”.
Court was unable to provide specific numbers on how large this “industrial scale” actually is, she noted ASIC currently has investigations into “seven or eight of these entities”.
“Every single one of those investigations has multiple potential targets sitting behind it,” she added.
Advice firms involved
Much of the attention has, for good reason, been focused on the involvement of Ferras Merhi and the advice firm he controls – Venture Egg Financial Services – which were both authorised representatives of InterPrac Financial Planning.
While Merhi has had his assets frozen – and been ordered to hand in his passport – the only thing technically stopping him from being able to provide financial advice is InterPrac cutting ties.
He could have swapped over to the AFSL he controls – Financial Services Group Australia (FSGA) – but ASIC cancelled its licence in mid-June.
However, Venture Egg isn’t the only advice firm on the regulator’s radar.
Reilly Financial, controlled by Rhys Reilly, is also listed on the regulator’s Shield Master Fund enforcement page.
Interestingly, historical ABN details show that the holder of Venture Egg was previously called Ferras Merhi Pty Ltd & Rhys Reilly Pty Ltd.
While Reilly Financial is still an operating advice firm, Reilly himself appears to now also be operating a different firm, named The Life Insurance Company.
Also authorised through InterPrac as of 21 May 2025, the firm is situated in the same building as Reilly Financial.
The aforementioned FSGA licensed four firms that ASIC highlighted: Rebellis Financial Services, 5 Point Australia, AS Financial Planning, and STC Financial.
All four firms entered into liquidation on 3 December 2024.
The other licensees named are the currently in liquidation Next Generation Advice, which has the distinction of also being connected to the United Global Capital (UGC) collapse, and MWL Financial Services.
While MWL is one of the last entities standing, it has some close ties with Keystone.
MWL director and manager of its accounting business, Louie Kortesis, also served as a director of Keystone from 29 December 2023 to 14 November 2024.
According to The Australian, around $4.9 million found its way from Shield through the Chiodo Corporation to 24Calibre, an entity controlled by Kortesis, “apparently for celebrity appearance fees, agent fees, travel costs and operating costs”.
Warning for consumers
Short-term takeaway for ASIC, Court said, is that Australians need to be alert to the dangers of high-pressure sales tactics, clickbait advertising and promises of unrealistic returns that are enticing consumers to invest their retirement savings into complex and risky schemes.
“When it comes to sales calls about super switching, there are some big red flags people should be alert to – being asked to make a quick decision is one of the most obvious. Remember, a good deal won’t vanish overnight,” Court said.
“The initial salespeople can be very persuasive, often the underlying schemes are complex or not made clear to the consumer, and it may be very difficult for even experienced investors to spot problems. Once you start on the path it can be hard to get off.
“These calls don’t have the hallmarks of a typical scam. The caller will seemingly have your best interests at heart, and they say they want to help you find a better super product or locate lost super for free.”
She added that these referral firms use the referrals to financial advisers as a way of creating a “sense of comfort and legitimacy”.
“Consumers should always ask questions about salespeople’s connections to funds, particularly in circumstances where a particular fund appears in the pitch, as there may be a commission arrangement,” Court said.
“If you are unsure or are feeling pressured, just hang up.”
Horse has bolted.
Where was ASIC when they would’ve made a difference?
All of this mess is ultimately ASICs fault. They failed to regulate these funds properly then the process of forcing funds into liquidation only rewards ASIC. One day the handling of all of this by ASIC and their “appointed” liquidators will come to the fore and it’s enough to put everyone off the industry.
That is the biggest load of garbage I ever heard- no industry governing body can stop fraudulent scammers. this isn’t a Tom Cruise Minority Report movie where perpetrators are caught before the act. When you say things like this you clearly have no idea how regulation works.
And now its with the administrators. Administrators are not on the investors side their business model is how long and how many fees we can extract from victims. Nothing will happen to the directors that caused this and asic will say stuff but they have no real power or balls to do anything.
I know others that went through a similar thing with Hailfax. asic let them submit audit reports for 10 years that did not match up. When the director of halifax finally went into self administration it went to administrators who extracted 4x the fees that the original directors embezzled. The administrators too 4 years to come to the conclusion they could not track transactions and work things out. During that time the victims were paying for the administrators empty offices during covid. Asic did nothing to help, the courts could not tell the difference between a stock holding, cash, exchange rates and dividends. Then the best the administrators/couts could come up with after 4 years was to pool everyones funds and pay out based on balances at the start of the 4 year administration. People in SMSF invested in the mag 7 lost all their gains. All you have seen is the auditors get a 50k fine and investors lost 50mill to administrators and dogy directors. Asic and the courts signed off on it. The whole system is broken and corrupt.
Don’t trust the finance orgs, banks, asic, courts or administrators.
Importantly, she noted, the investigations are looking at the entire chain, including conduct of the lead generators, the financial advisers, the superannuation platforms, “who we think have a real role here”, and the research houses that “listed these funds as investable”
Wonder if ASIC are going to question their own role in this.
ASIC have said they jumped on this one “earlier” than they normally would. Yet over $500m were invested and thousands of people affected… They are already patting themselves on the back for this.
ASIC needs to demonstrate something for the ASIC Levy they collect. Interprac as the AFSL does no supervision of their advisers. Interprac had research on these funds from SQM who are or were operating under their AFSL. Interprac have other advisers running the same call centre business models but not using these failed funds but what are they using and how competent let alone complying is their advice. Interprac are still telling current advisers that nothing is wrong and everything is fine with no further issues expected. Clearly ASIC are under resourced because this makes no sense. By the time something is done, the people involved will be retired and laughing all the way to the bank. While the platforms played their part in allowing these funds to be listed, they were given research to support the product, approval by Interprac that they can be used and confirmation that the FUM will follow, which it did in record numbers with nobody questioning how such crazy numbers were possible from the advisers involved.
The average employment term of those Advisers were between 3 month to 9 months. The sales manager, the Compliance Manager, the Directors employment terms are measured in years.
ASIC blaming Advisers is trying to avoid their own failings and accountability.
This comment is on target
I like the following sentence. In other words they aren’t financial advisers. ASIC sat on their behinds and did nothing in relation to this group and others for way too long.
“They’re not financial advisers, per se, but they are effectively operating like call centres with a script and with the job of enticing these investors into the web.”
There are some big name platforms that let this crap through, they shouldn’t get off scot free.
There are still comparison ads popping up on Facebook so hopefully asic are all over those too.
They are probably the same firms with a different name and no ASIC won’t be doing anything.
https://www.asic.gov.au/regulatory-resources/managed-funds/managed-investment-schemes/
ASIC’s role in relation to regulating managed investment schemes includes:
– undertaking proactive and reactive supervision and surveillance activities into operators’ conduct and disclosure obligations
– taking enforcement action in response to non-compliance with the laws administered by ASIC
– assessing Australian financial service (AFS) licence applications submitted by entities seeking to be operators of registered and unregistered managed investment schemes
– assessing applications for registration of managed investment schemes
– exercising ASIC’s administrative powers in relation to AFS licences and disclosure
– providing guidance to industry and policy advice to the Australian Government
– providing relief from provisions of the Corporations Act where necessary and appropriate.
From the first dot point, what ‘proactive’ measures were undertaken?? Looks like they took a more reactive approach after the fact. The laws were broken well before the eventual failure of these funds. If biggest regulatory body could not have guard rails in places to prevent this from happening, it indicates that the system is broken.
This.
I’m one of the investors. My question is what did the responsible entities know? InterPrac and Sequoia ‘allegedly’ have blood on their hands. I haven’t yet seen any reporting around the investigation into them and what the potential consequences will be.
FA here… that’s the sickest part of it all. Platforms like netwealth and macquarie green lit products that you can’t even look at their historical performance or asset holdings.
So wrong as now advisers are seen as the scam artists.
I think the only way to find that out is to take them to court. If I had to take a guess.. I’d say there certainly were people inside Interprac that knew the “business model” and ok’d it. That said they probably did NOT know of the under the table payments the Advice businesses were receiving (which is also illegal).
It’s also likely they did NOT know the investment funds themselves (Shield/First Guardian) were dodgy.
Unfortunately it’s a multi levelled issue and ASIC were asleep at the wheel, I’ve heard anecdotally multiple Advisers informing ASIC of this scam and the delay of action allowed it to continue for so long and hence the severity of the issue as well.
Now, me as an adviser who is trying to do the right thing is likely going to have to fork out money as part of the CSLR to pay back the victims of these crimes. I doubt Venture Egg/Interprac and the likes are going to be able to afford the thousands of claims against them.
If you haven’t already, keep up to date with some of the other people on reddit, r/ShieldMasterFund
Maybe we need to look at the regulator that issued the licence to these fund managers in the first place? Without that, these fund managers wouldn’t have been unleashed on the industry to begin with.
where is the directors ban, the accountants ban and lawyers that also helped ban?
If the Directors, Responsible Managers, Trustees of the funds allowing the investment funds, rating houses and the unlisenced call centres aren’t going to get slamed for this and the Advisers are the only ones getting smashed I might actually quit.
The problem is never just the Advisers – all they need to do is see where the money goes… Advisers are only a small part of these scams.
I truly feel for the investors that placed their trust in a broken scheme desinged to strip them of their money only to line the pockets of everyone in the supply chain.
I also feel for the good advisers out there who both directly and indirectly pay the price for this misconduct and illegal activities. Either through public mistrust of the profession or directly with the CSLR. It’s a completely broken system that penalises the good and bad, while most of the time, the unlisenced parties/managers etc get off scot free.
It is reported that the prime adviser concerned, Venture egg, took many millions of dollars under the table to flog these products via call centres. Those who had intent to deceive should go down in flames. But note people in the industry, just trying to do their job, are also victims. Fraud took place here and done by guys who knew where the system’s weaknesses were for which they exploited its vunerabilities.
I’d say that would be the case with the majority of organisations that used these investment funds. I’ve also heard advisers being threatened with getting fired for not following their process. These guys also prey on the young, eager advisers who don’t really know better as they are “fed” information that it’s all above board and manipulated.