Following the Australian Securities and Investments Commission’s (ASIC) announcement that it had commenced civil proceedings against InterPrac Financial Planning, ASX-listed parent company Sequoia saw its shares plummet 22 per cent on Thursday morning before a trading pause was issued.
It’s the second pause in trading for Sequoia this financial year, with the first coming after a 30 per cent drop in share price to a five-year low of $0.24.
The latest hit to the share price wiped out any of the recovery Sequoia had seen over the last three months, closing at $0.22.
As part of its civil penalty proceedings against InterPrac, ASIC has sought orders to “restrain Interprac from carrying on a financial services business”.
In its filing to the Federal Court, the regulator alleged that “thousands of Australians were exposed to poor financial advice and significant risks” from the Shield Master Fund and First Guardian Master Fund through “critical oversight and compliance failures” by InterPrac.
“ASIC has commenced civil penalty proceedings in the Federal Court against Interprac for allegedly failing to ensure its former authorised representatives Venture Egg (a corporate partnership), and Rhys Reilly Pty Ltd (together, Representatives), complied with the best interests obligations and for failing to have adequate risk management systems,” ASIC said.
“Together, these Representatives advised around 6,843 clients to invest around $677 million of their superannuation into Shield and First Guardian. Both funds have now collapsed, leaving people’s superannuation at risk.”
In an ASX update on Thursday afternoon, Sequoia said that “after careful consideration of ASIC’s statement of claim, InterPrac has determined that it intends to defend the allegations vigorously”.
“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.
“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.”
In May, InterPrac cut ties with both Ferras Merhi and his firm Venture Egg, with the licensee ceasing its authorisation of both parties.
In August, Last week, Sequoia confirmed that “InterPrac is in the process of terminating its relationship with Reilly Financial”, and since confirmed that this would extend to Rhys Reilly’s other firm – The Life Insurance Company – as well as Miller Wealth Group.
According to the firm, InterPrac “believes it has acted in accordance with its obligations under the Corporations Act and will defend this at such proceedings”.
“The InterPrac Board and support staff are committed to continue to act in clients’ best interests and take our compliance and governance obligations seriously,” said Sequoia Group managing director and chief executive Garry Crole.
“We do recognise the impact on clients affected by the external investment product failure confirming InterPrac has cooperated fully with ASIC’s investigation.”
Sequoia also maintained that, because the ASIC matters relate to “historic events”, they would not impact either firm’s “ongoing operations, current authorised representatives, or ability to continue to provide financial services”.
Among the regulator’s allegations against InterPrac are that the licensee failed to:
- have in place an adequate process for approving financial products it allowed onto its approved product list, including Shield and First Guardian, and relied entirely on external research to add those funds to its approved investments list for advisers;
- respond appropriately to the use of lead generators (being Imperial Capital Group Australia Pty Ltd and AGAT Business Pty Ltd (in liquidation));
- respond adequately to news that payments had been made to Ferras Merhi’s companies by entities associated with First Guardian and Shield;
- enforce or maintain a hold on new investments into Shield and First Guardian after Interprac’s managing director and responsible manager, Garry Crole, acknowledged serious issues with both funds;
- prevent the use of a ‘negative consent’ practice, which led to some clients’ superannuation being invested in Shield and/or First Guardian without express consent from those clients;
- respond adequately to significant inflows of investment into Shield and First Guardian;
- provide adequate responses to client complaints about advice from the Representatives to invest in Shield or First Guardian and instead relied on a ‘template’ response which often failed to consider the appropriateness of the advice; and
- respond adequately or impose meaningful consequences in response to serious compliance issues, including failings repeatedly identified in audits.
