Following both Keystone Asset Management, the responsible entity for the Shield Master Fund, and Falcon Capital, the RE for the First Guardian Master Fund, entering liquidation, investors have been left with uncertainty over how much of the roughly $1 billion in combined assets held in the funds would be recoverable.
The Australian Securities and Investments Commission (ASIC) has launched a range of investigations across the parties involved.
Earlier this month, deputy chair Sarah Court said the regulator’s investigations 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”.
Noting concerns that First Guardian and Shield were “allegedly operating a Ponzi scheme with thousands of Australians’ superannuation savings”, Slater and Gordon announced it is investigating a potential class action on behalf of investors.
Andy Wei, Slater and Gordon principal lawyer in class actions, said the firm is looking into the matter and the claims that investors were advised to put their super into “largely unreliable funds”.
“What we’re seeing here is potentially deliberate misleading of investors, many of whom are everyday Australians looking to secure their nest eggs. They were repeatedly assured that their superannuation would flow into diversified portfolios with steady returns,” Wei said.
“However, recent information shows that these funds were largely illiquid with their values grossly overstated.”
Noting that the illiquid assets could be harder to recover without “significant loss of value”, he added that the recovery process could still leave “more than 12,000 Australians out of pocket”.
“These are people’s savings, and they deserve far better than this,” Wei said.
“Superannuation is meant to be tightly regulated, and many investors likely believed their money was safely managed by trusted, blue-chip superannuation companies.”
The class action lead also called for impacted investors to contact the firm, which will help it assess if a class action is viable.
“We are particularly concerned for investors in First Guardian Master Fund, as FTI Consulting – the liquidators for First Guardian – have now confirmed that they expect ‘a substantial shortfall of recoverable assets’,” Wei added.
The most recent class action involving a financial services firm’s collapse ended with Dixon Advisory parent company E&P Financial settling for just $16 million despite client losses in the hundreds of millions – leaving the tab to be picked up through the Compensation Scheme of Last Resort.
The settlement, as announced in November 2023, included E&P covering $4 million and its professional indemnity insurance covering the remaining $12 million, and was reached without admission of liability.
A good proportion of the funds in SMF are held in properties and shares. So these are liquid and can been sold (with expected loss of value in many cases), other funds may be extracted from insurances and litigation (there is more than one class action). So there is hope that funds will be eventually recovered over a few years, and potential for partial funds to be distributed to investors as they become available.
Except when you look at the financials of this fund and they have loaned tens of millions to hospitality businesses and a micro brewery that has already also gone into liquidation as a result of this. The money in large part was invested in “illiquid assets” and seems unrecoverable..
The lawyer taking their cut just means there will be even less to pay investors, so the CSLR bill will be even higher.
Its lucky that the CSLR can just hand out as much money as they want, because that money comes from a magical place that never runs out.
Lawyers circling about an insolvent company trying to get more fees. The only people who will benefit from this class action are the lawyers.