Merhi seeks to avoid ASIC interrogation as a ‘matter of fairness’

Appearing in the Federal Court of Australia on Monday, former financial adviser Ferras Merhi’s barrister, Vanessa Plain, made an application to “seek to be excused from the section 19 examinations”.

Under section 19 of the Australian Securities and Investments Commission Act 2001 (Cth), the corporate regulator is able to issue a notice requiring a person to appear before ASIC staff and answer questions under oath.

Calling the issue a “matter of fairness”, Plain argued that once ASIC has committed to a pleading, “we don’t wish to see Mr Merhi examined at a time when he’s facing allegations of unlawful conduct”.

The corporate regulator said in court that a section 19 examination with Merhi had been scheduled before the proposed hearing over the application on 23 October, however agreed to adjourn this examination until after Justice Mark Moshinsky had made a decision.

Merhi’s barrister did not explicitly cite it as a concern in court, however, a significant power for the regulator is that the ASIC Act does not allow someone undergoing a section 19 examination from refusing to answer a question on the basis that doing so might incriminate them.

While an examinee can be compelled to answer, if they claim the answer may incriminate them before responding, then that answer cannot be used in any eventual criminal proceeding.

Plain also sought a statement of claim from ASIC as soon as possible, citing the roughly two-year period since it commenced investigating and that the “concerns are now elevated to unlawful conduct”.

Merhi is not the only party involved in the Shield and First Guardian cases to use the potential of criminal proceedings to attempt to avoid other legal issues, with former Keystone Asset Management director Robert Filippini’s lawyers arguing any defence against a civil suit could prejudice the potential criminal case.

Building contractor Filippini has been trying to avoid the civil suit that the receivers of Keystone Asset Management launched against him for months, with the proceedings aiming to claw back $158 million.

However, Justice Moshinsky ruled that, despite criminal proceedings indeed being a “reasonable possibility”, it was not grounds to stay the civil action.

Late last month, ASIC announced it had stepped up its enforcement efforts in relation to Merhi.

The corporate regulator has been looking at Merhi for some time, taking its first action in February this year when it sought interim freezing orders over his property, which the Federal Court granted and subsequently extended until 12 December 2025.

ASIC then cancelled the Australian Financial Services Licence of Financial Services Group Australia (FSGA), which he also controlled, while also permanently banning its “on paper” responsible manager, Graham Holmes, before securing travel restraint orders against Merhi in July.

The regulator’s latest move included seeking approval from the Federal Court to “expand its existing proceeding” against the currently unlicensed Merhi to further allege that he “engaged in unconscionable conduct, failed to act in the best interests of clients, gave conflicted advice, and provided defective statements of advice whilst receiving millions of dollars”.

“Between 2020 and 2024, Mr Merhi and advisers working for him allegedly advised clients to invest around $296 million of their superannuation into the First Guardian Master Fund (First Guardian) and around $230 million into the Shield Master Fund (Shield),” ASIC said in its statement last month.

According to the regulator, this action netted Merhi almost $18 million in upfront advice fees and more than $19 million from “entities associated with First Guardian for marketing First Guardian to clients”.

“This type of conduct doesn’t just undermine the integrity of the financial advice and superannuation industries, it can have a devastating impact on people’s lives,” ASIC deputy chair Sarah Court said.