Financial advisers involved in funnelling client funds into Falcon Capital managed investment scheme First Guardian Master Fund and Keystone Asset Management’s Shield Master Fund are far from the only target of the Australian Securities and Investments Commission’s (ASIC) investigations.
While ASIC deputy chair Sarah Court had signalled that adviser bans related to the investigations were imminent, it is far from the only path the regulator is exploring.
ASIC’s investigations, she noted, 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”.
Focusing on the superannuation platform component of the failures, Court said ASIC’s view is that if a trustee is hosting one of these funds, they “have an obligation to make sure that what is being offered through your platform is fit for purpose and appropriate for investors”.
The deputy chair referred specifically to Macquarie and Equity Trustees as targets for investigation, with the trustees providing Shield as an investment option on platforms they hosted.
Equity Trustees also included First Guardian as an option on super platforms it hosted, as did Netwealth and Diversa.
Importantly, Court noted, for a sizeable portion of investors in these funds, the legitimacy of a firm such as Macquarie gave them confidence to proceed.
“I don’t want to overgeneralise, but at least some of the investors in the Shield matter are telling us that they thought that their investment was with Macquarie because it was sitting on a Macquarie platform,” she said.
“The fact that they had this underlying investment into this complex Shield Master Fund has come as news to them, and the documents that they saw, many of them had the Macquarie brand on them.
“So, we are very concerned about that, and we are investigating. I think we’ve been public about this before – I hope we have. We are certainly investigating Macquarie and Equity Trustees and considering what options ASIC has available to them to hold them to account for what we think are failures, or certainly, that’s the way our investigation is progressing.”
Massive influx of investments a ‘red flag’
A key feature of the Shield and First Guardian investment schemes is that there was a significant scale-up of investment over a short period of time – largely driven by the lead generators and handful of advice firms funnelling client funds into the products.
According to Court, there are two elements to ASIC’s investigation of the super platforms based on this “sudden influx”.
“Firstly, what obligation does a super trustee have before a fund is put on its platform? What due diligence do you need to do, etc, what do you need to satisfy yourself of? That’s one element of what we are thinking about,” she said.
“The second element is, even if there is not – and the super funds are saying, ‘Well, hang on. We don’t have that obligation. We can’t possibly check everything that goes onto our platform.’
“So, the second element of what we’re thinking about is, even if you accept that premise – I’m not saying we do, but even if you did, if you are faced with a sudden influx … of hundreds of millions of dollars suddenly going into this little known fund our that’s sitting on your platform, then surely that is sufficient to signal a red flag.”
Court added: “We will be arguing potentially that a super trustee does have that obligation to look at the flow of funds that are coming through its platform.”
My superannuation would still be in a cbus superannuation fund if it wasn’t for a royal commission into superannuation funds a few years ago and I was told that cbus didn’t even reach the top 40% of superannuation funds from that brilliant royal commission. Was this a lie also from my so called financial advisor. Now we have so I’ve been told by Diversa trustees these so called trustees are working with ASICS to work out this mess. My personal belief is they should be in no way working with ASICS but be independently investigated by ASICS or better still an independent commission that also investigates ASICS I didn’t want to make a fortune I just wanted to have my money invested with a superfund a little better than a mid range superfund
What a joke!! What an absolute joke! Been working for 55yrs, haven’t used any of my super, have a hole in my roof and now they have gone under. How am I meant to get it repaired!? That money was for my retirement & out of pocket expenses. You save this money for your retirement so I can enjoy what years I have left, it’s supposed to be guaranteed & government supported! How about a class action against this bloody mob !
You would think the advisers and Macquarie have Professional Indemnity insurance to cover our losses… when it is due to their negligence…??
I am merely shocked that ASIC took so long to respond to this cluster of lies. While most investors thought they were protected by ASIC. Firstly there is clearly a conflict of interest made by a few greedy self appointed individuals who simply preyed on people’s retirement money that was earned in a genuine manner far from these self entitled unprofessional individuals. I too believe ASIC did not protect these Australians in a system we thought we were protected and should take some responsibility in this matter after money has been sifted away under their noses. Step it up please ASIC.
Agree 110% as one of teh 6000 investors and in my early 60’s im at a loss today not only finacially but mentally and the impact im sure is imanent on my health.
The though of working 40+ years and having my empoyer invest in my future with Super payments whilst knowing that in teh background one day when i choose to retire i have a nest egg to fall on, or should something happen to me my adult children have a finacial advantag from my legacy has all be stolen from me now…i have no finacial future now and will no doubr be a burden on teh Australian tax payer with the loss of my super. the super that I always thought was protected , thinking that if my empolyer was aloud to deposit a govt decided % i was protected …wrong!!!! Now im sadden and dipressed
I am in the same boat, just turned 60, been working since i was 15 1/2 425k down need to work till 72 just to finish paying the house off, rather distrought
I learned that People working on the Diversa platform have been sacked as they tried to advocate for the members affected. Basically, they are stating that their employees can’t go against their status quo which is framed as their company policy. Funny, ASIC hasn’t yet investigated these sub trustees, really ASIC!
Everyone has a role to play here – some more than others. Did the fund manager diverge from the stated investment strategy or were they not true to label? Did the fund manager and responsible entity looking after the managed investment scheme not have the required skills, processes, policies etc. Did the fund auditors not pick this up. What was ASIC as regulator doing during this time as these are basis licensing requirements. ASICs introduction of TMDs was meant to help advisers and clients identify whether an investment like this one was suitable for their circumstances. The super fund trustees would have assessed whether the managed fund should have been included on the menu in accordance to APRAs Prudential Guidance SPS 530 Investment Governance. The assessment would have considered the managed investment schemes returns, risk, liquidity, demand, ability to administer, the manager’s strategy, their skill, recent audits and fund financials, information from ratings agencies – which is mostly publicly available information. The law unfortunately does not compelled a fund manager to disclose much more to a super trustee. Technically ASICs role as regulator of managed investment schemes is to monitor and identify issues like this before they affect the public. Advisers had a role to ensure they recommended diversified investment portfolios, thereby not holding concentrated amounts in any particular investment. Clients have a role in needing to understand what is being recommended to them, seeking second opinions, researching themselves and asking questions where they do not understand what something is or how a it works.
Who was the Auditor of this Super Fund before it went bust??? Why wasn’t any of these transactions picked up in any audit of the super funds??? Did ASIC and the ATO receive compliance paperwork along with signed off Audited Financial Statements of this Super Fund within the required timeframes. If not why has it taken ASIC this long to move against the fund directors in order to stop any further funds from being taken out of the superannuation fund.
I am in same space 95% of my super was in FGC basically $440k supposed value. What do I do now? So much for my retirement plans. This has now been frozen for 12 months, no other prospect of further market growth – What has ASIC been doing for 12 months – waiting for FGC to hide all digital records of their misplacement of funds?
I’m the same as you I had $441 thousand in FGMF and was looking at retirement next year at 65 how I’m going to working into my eighties just to make up the loss
Get a superannuation lawyer . Research CSLR to see if you are eligible
My partner had/has $150k in his and we had been trying for almost 2 years to roll it to another fund and they kept stalling it for ages, then it was all frozen.
Get angry and start a class action against ASIC directors
I’m in the same situation—over 90% of my superannuation, more than $300,000, was invested in the Shield Master Fund. My investment contract clearly stated that no more than 33% should be allocated to a single company. So how did this happen? How did Macquarie not flag this as a serious breach and allow such a disproportionate investment to go through? How did ASIC approve the formation of this fund in the first place, and why didn’t the ATO step in to regulate it?
Most importantly, why are the directors behind this scheme not facing criminal charges?
The biggest issue here is the differing expectations between government regulators, on the parties that they regulate.
APRA has expectations that super funds, even though they don’t hold custody over the underlying (and regulated) funds, to have some magical ability to look through to the underlying investment and risks of the other regulated parties.
Conversely, ASIC have next to no expectations on the managed investment schemes to actually provide super funds this data, no expectations to provide regular information to the regulator or government, and no proper monitoring over funds to ensure this type of fraud doesn’t occur.
If ASIC stepped up and put proper audited and regular disclosure of the underlying investments, which funds could rely upon, then they may have an argument.
It is ASIC whom regulate Managed Investment Schemes and Financial Advisers, and it is ASIC who are responsible for the fraud that their regulated entities cause on the public. The government needs to completely change how they regulate entities. Get the ABS do what they do best, and collect data and publicise data and statistics on all government regulated entities.
The regulators can then do their job and monitor the entities they regulate using publicly available information instead of putting unrealistic obligations to collect data on other entities, and then using them as a scapegoat for your own failings.
I am one of the thousands of hardworking Australians impacted by this scheme, having lost access to approximately 75% of my superannuation. The key question we all share is: what happens if our superannuation funds cannot be recovered? Are over 12,000 Australians now facing the prospect of financial ruin?
It is my understanding that the liquidators will seek to recover as much of the funds as possible. Any recovered amounts should be distributed to the unit holders, and the remaining losses should be covered by the government, given that superannuation funds are intended to be protected—particularly when losses occur through no fault of the individual.
Our greatest concern is that no authority has been willing to confirm whether this safeguard will apply in our case.
This was not a super fund. The super fund invested in it. There’s no case for government guarantees.
False!!!! This was fraud and misleading conduct breaching Super, Company and ASIC legislation! Investors will get their $ back, opportunity losses, interest and claim for damages! Macquarie and Interprac will all be hold accountable and pay up!
I hope u are right, really starting to struggle
And then we have the liquidators who also get payment out of our money .
$8,800 a day for Alvarez & Marsal for shield alone. Deducted from liquid assets they have already recovered.
This is a shocking indictment of Macquarie and how it does business resulting in the loss of people’s hard earned retirement savings. They need to refund the money in full to customers. This normally happens in third world economies and should not be happening in Australia if there is effective governance.
Its not MacQuarie they are the platform manager period. This falls right at ASIC, they are the supposed overlord of Superannuation Funds, why wasn’t it picked up earlier, who signed off on any audits done for the Super Fund. If signed off Audits weren’t done within the required timeframes why was ASIC so slow in taking action against the Director/s to stop any further funds from being taken out thereby causing the super fund to go bankrupt.
Macquarie have accountability they fast tracked Shield onto their platform after advisors promised huge inflows. Ka-Ching. Without doing due diligence.
What about the AFSL?
Our regulators are suppose to do checks and balances and head off these incidents aren’t they
Absolutely
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.
Out of interest, what is ASICs role in policing these investments.
It could well be argued that given ASIC didn’t have any issues with them, they were deemed to be appropriate for investors.
Did it not raise a red flag with ASIC that that there was a significant scale-up of investment over a short period of time? – largely driven by the lead generators and handful of advice firms funnelling client funds into the products.
If this “should have raised a red flag with platforms” why didn’t it raise a red flag with ASIC? Who will lead the class action against ASIC for lack of oversight?
ASIC pointing fingers of evil at everyone and as usual ASIC will take zero responsibility it self.
the reality is that asic deal with the aftermath. The industry players involved from the dealer group, researcher trustee and platform operator seem to have done nothing. I also cannot believe there was not one person aware of the web of conflicts and payments pushing clients into these products and the underlying investment decisions and poor governance of the fund issuer and related parties.
This is an ASIC debacle. If the super fund was not complying with auditing etc within the required timeframe for super funds, then ASIC should have stepped in straight away to find out what was happening within the super fund and its monies. End of the day, ASIC have a case to answer for here as well, quite possibly the ATO as well.
ASIC need to be held to account at the highest level!
What actually were the underlying investments?
From what I have read there are thousands of clients impacted by this cluster flub. The platforms, funds and trustee’s mentioned here and in others are far from innocent- one of these adviser companies had several thousands of clients? They most certainly knew it was happening and the scale.
Another one for the CSLR right… sigh!
ASIC do not understand and believe that it is the adviser that drives and are responsible for what products are Platforms generally and Super Funds in particular. As any adviser knows if the Fund doesnt meet the requirements and make the shelf space/research fee/admin fee of the platform then it doesnt get on to the platform whatever the adviser wants or says.