On Monday, Netwealth Group announced on the ASX that Netwealth Superannuation Services (NSS) has submitted an application to Financial Services Minister Daniel Mulino seeking financial assistance under Part 23 of the Superannuation Industry (Supervision) Act.
According to the statement, a total of 1,088 Netwealth members have a combined exposure to the First Guardian collapse of $101 million.
“Any financial assistance granted will be applied to restore the fund and to compensate impacted members,” Netwealth said.
“The application seeks to restore members to their position prior to the fraud occurring.”
Asked about the request at a doorstop interview on Thursday, Minister Mulino confirmed that he had received the letter, calling it an “important request that I will consider very carefully”.
“I asked my department upon receiving that letter to provide me with a briefing. Once I’ve received that briefing I will then write to APRA, as I’m required to do under the act, for APRA’s views as the independent macro prudential regulator, and I will table that letter that I write to APRA in the Parliament,” he said.
“So, I don’t want to prejudge where I will go in my consideration of that request, but I’m stepping through methodically, getting briefing from the department and then, in turn, as required by the act, I will write to APRA.”
The minister also acknowledged the hardship that victims have faced and stressed that the government is “taking this matter very seriously”.
“I’m taking this matter very seriously,” Minister Mulino added.
“The other thing I would note is that the priority of the independent regulator has been to take all the actions that it can to protect investor funds. So that includes undertaking a range of actions, including licence cancellation, freezing funds, travel restrictions. It has taken actions against a number of the platforms in addition to those actions against financial advisers and others.
“I welcome the fact that ASIC, through its various actions, has entered into an agreement with Macquarie which has seen over $300 million of compensation go to the investors in Shield. And that’s a very substantial step forward. But I just want to preface my answer by saying that there are a number of actions underway.”
Equity Trustees also seeking government aid
During Equity Trustees Holdings’ annual general meeting on Thursday afternoon, managing director Mick O’Brien confirmed that the trustee would also submit a Part 23 assistance claim.
“ETSL is preparing to make a claim to the minister for financial services under Part 23 of the SIS Act for financial assistance due to fraudulent conduct and/or theft that has occurred against the trustee and funds, and will seek full remediation for members. As has been reported in the media, Netwealth has made such an application in respect of its exposure to First Guardian,” O’Brien said.
“Part 23 of the SIS Act is designed for exactly these purposes, and we look forward to the various authorities prioritising action which establishes that such a fraud occurred.”
He also stated that the trustee would seek “remediation for members through the liquidation process”, which he added shows good signs of recovery for Shield investors.
“ETSL is also letting members know how they can access the Compensation Scheme of Last Resort, which may provide up to $150,000 compensation per member,” O’Brien said.
He added: “I would like to reiterate that we are all extremely disappointed by what has transpired in respect of the two failed managed investment schemes – Shield Master Fund and First Guardian Master Fund.
“I would also like to acknowledge the deeply difficult circumstances for individuals affected.
“We are providing support to members, with clear communication and complimentary counselling services for those requiring them, exploring all avenues for member redress and we are committed to collective industry action to protect investor interests going forward.”
O’Brien also defended Equity Trustees’ due diligence process, adding that it “did not at any time recommend or direct member monies”.
“At the request of the platform promoters, ETSL instigated its process for listing of new managed investment schemes. It undertook due diligence to determine whether the schemes should be allowed on the platforms and available to members, which the schemes passed in both instances,” he said.
“This contrasts with the approach taken by the industry when offering direct securities to their members, which are less diversified than MISs but are nonetheless simply made available as part of an investable universe, in addition to all the managed investment schemes. Of course, these types of direct investment choices are available on almost every platform, many retail funds and most major industry funds in Australia.”
Well ETSL s52 of the SIS Act, which you love to quote from, says you broke the law!
So does APRA Prudential Standard SPS 530.
Where are the bannings?
If only ASIC had of done their job!
If this is paid under Part 23 of the SIS Act it’s set precedent and creates a further moral hazard, in conjunction with the CSLR being it’s own moral hazard. Must be great to be crook!
Can we advisors ask for this aswell?
The advice community is disappointed that Equity Trustees have failed in their oversight role and have broken s52 of the SIS Act and APRA Prudential Standard SPS 530. You’re an APRA Regulated Trustee so start acting like one.
It’s not everyone else’s fault that you failed to do your job.
So let’s be clear……allow any trustee who fails in their governance of approved funds to simply side step any failure of their responsibility and direct all members to CSLR for the rest of us diligent suckers to foot the bill…..again!
This is an absolute joke !!
Net wealth and Hub 24 and Macquarie owners have made truckloads of money.
Seem them in the rich list columns.
Michael Heine and Family live in a $25.0M Harbor side mansion and have multiple wealth sources. A bailout for these people is a ridiculous idea. Their assets should be sold up first.
Where are the true journalists in this?
The fact they want to hand out is a disgrace Financial advisors at the front end of this system had their trail commissions taken off them in the royal Commission and there was no government handout.
Handouts for the corporates and Rish listers to save there business whilst they personally hang on to all their personal assets is a JOKE. Come on journalists please do your job!
Netwealth sure but Hub24 weren’t exposed to this and aren’t asking for a handout??
What an ignorant comment.
Netwealth are not responsible for the fraud conducted by those operating the schemes, so why shouldn’t they be able to apply for this?
As for the Henie family, why hate on them because they’ve built a great profitable business? They don’t manage either of the funds in question.
Trailing comms situation completely irrelevant to this.
No chance Netwealth should get off scot-free. The allowed these funds to be offered to their super members. They are the trustee. Notice these funds didn’t appear on most other platforms who did their due diligence and said no. They then didn’t monitor the abnormal use of these funds. 6000 clients from one advisers? No questions asked? Please, Netwealth are culpable as are others in this sad chain of failure.
The wealth of the owners of Netwealth should have no bearing on this. They are a platform that relied on the information provided by the ratings agency and auditors.
They are just another link in the chain, and no more responsible for what happened than the 14,950 financial advisers that had nothing to do with it.
It’s clear as day that this is a fraud. The only reason everyone is pointing fingers at the trustees is because they have money. The trustees were defrauded just the same as the members. No amount of due diligence would have prevented this.
Oh right. Trustees are allowed to be defrauded and but then financial advisers need to be an all-knowing entity that sees more than APRA regulated trustees, SQM Research houses, auditors and ASIC themselves. It’s a two tier policing system.
Financial adviser just means citizen with no rights.
I wonder if individual advisers would be given any assistance if their businesses suffer because of poor decisions making …
Netwealth can borrow what they need to cover their exposure to First Guardian. Why should the tax payer have to pay for a loss from a highly successful business
When are we getting a royal commission into the government bodies whose entire job is to provide oversight in these situations? A bit more proactive oversight would go a long way
Senate Reports confirm that ASIC has failed. But ASIC want to block every freedom of information request to save face. There should have been a royal commission into ASIC years ago.
“I asked my department upon receiving that letter to provide me with a briefing. Once I’ve received that briefing I will then write to APRA, as I’m required to do under the act, for APRA’s views as the independent macro prudential regulator, and I will table that letter that I write to APRA in the parliament,” he said.
Sounds like the Members of Parliament are simply the people in front of the press – and the “Public Servants” (not sure that description is accurate anymore) to make the decisions. Who do these Public Servants actually take directions from? That would be interesting to know.