In an email to federal members of parliament, Association of independently Owned Financial Professionals (AIOFP) executive director Peter Johnston blamed the latest scandal on the lack of appropriate consequences for prior failures.
“The Shield/First Guardian fraud must be sorted before it further destroys families and weakens the entire financial services sector, Minister Mulino must immediately take the supreme leadership role,” Johnston said.
“The truism of ‘history always repeats itself’ certainly applies in this instance but unlike last time, all industry stakeholders are being held to account for their conduct.
“The facts behind the 2009 Trio $176 million fraud are the Senate inquiry found that stakeholders ASIC/APRA, research houses, trustees, custodian, auditors and administrators were all inept with their duties and all consumers (with the exception of SMSF trustees) were compensated via an APRA Levy, Part 23 of the SIS Act.”
Johnston argued that financial advisers were unfairly targeted in relation to the Trio Capital failure, saying that while the Senate findings “barely mentioned” advisers, the regulator “publicly crucified” the sector while other stakeholders “avoided scrutiny”.
“Fast forward to 2025 and all the same stakeholders are facing the same criticism for much the same conduct 16 years earlier over this Sheild/First Guardian collapse. The question must be asked as to why stakeholder conduct has not changed?” the AIOFP head said.
“A very likely response is no person or persons were ever held responsible for their conduct therefore habits and procedures do not and have not changed. The same outcome happens today when ASIC takes on the financial institutions in the courts, if ASIC wins those persons responsible are rarely ever banned or even identified, the fine is paid out of shareholder capital and corporate culture subsequently does not change.”
However, while he said the AIOFP is “very pleased” that the corporate regulator has taken action against other links within the value chain in relation to Shield and First Guardian – including Macquarie, Netwealth, Equity Trustees – ASIC also needs to face some tough questions.
“Who is going to take action against ASIC after being warned on no fewer than two occasions about the fraudulent behaviour and failed to act?” Johnston said.
“Surely some heads must roll within ASIC and they must contribute to the settlement or nothing will change too with their behaviour going forward.”
Additionally, the continued legal action from a range of directions to, as Johnston put it, “protect their individual reputations” will only serve to fatten the wallets of lawyers rather than compensate the victims.
“This will only create a ‘lawyers picnic’ with rivers of golden fees cascading into their bank accounts and more importantly it will take many years to resolve itself,” he said.
“Not a great outcome for consumers and all sectors of the Financial Services industry, but fantastic for the legal fraternity.
“It should be noted by lawyers and all other stakeholders that taking action against any financial advisers who only advised on the Shield/First Guardian products (as opposed to being involved the fraudulent activity) may be a waste of time and money.
“The Financial Advisers involved with the TRIO fraud were informed by their PI Insurers that they were not covered ‘because they cannot be held responsible for fraud’ … and we get the same opinion today.”
The association called for Minister Mulino to utilise the Part 23 SIS option and then impose a levy on “every MIS/superannuation product going forward to fund future calamities in the industry”.
“This action will immediately give consumers their savings back, curtail the litigation, render the current outrageously flawed CSLR structure obsolete, provide a fair funding option for future consumer losses due to product failure,” Johnston said.
“Furthermore, as part of the settlement the part 23 levy quantum should be treated as a loan and returned once the new proposed funding mechanism is sufficiently capitalised.”
