Sequoia adds former ASIC commissioner to chair new AFSL governance committee

On Friday afternoon, Sequoia Financial Group announced that it has established an Australian Financial Services Licence (AFSL) governance committee, with former ASIC commissioner Danielle Press coming on board as independent chair.

Sequoia has been under fire over its role in the failures of the Shield Master Fund and the First Guardian Master Fund, both of which saw heavy flows coming from advice firms linked to Ferras Merhi – either through his firm Venture Egg or others that his own AFSL had authorised.

InterPrac, which is a wholly-owned subsidiary of Sequoia, had authorised both Merhi and Venture Egg until cutting ties at the end of May.

In what appears to be a move aimed at combating the growing questions and its declining reputations, the ASX-listed company has brought Press in to head the new committee.

“This new committee reflects Sequoia’s ongoing commitment to the highest standards of regulatory alignment, governance maturity and risk management,” the firm said in a statement.

“It introduces an elevated and independent governance layer above the operational compliance structures of each AFSL and will in conjunction with the executive report to the SEQ boards risk and compliance committee.”

Alongside her five years as a commissioner at the corporate regulator, Press has spent more than 30 years in the financial services sector, including chief executive roles at both Equip Super and The Myer Family Company, as well as managing director of UBS Global Asset Management (Australia).

The governance committee also isn’t her only current position, having joined Insignia Financial’s Trustees Board as chair in September last year. She also chairs the Customer Owned Banking Code Compliance Committee and is a non-executive director at Infrastructure Specialist Asset Management and Income Asset Management Group.

“I am pleased to join Sequoia Financial Group in this important governance initiative,” Press said.

“Strong oversight and a robust compliance culture are fundamental to maintaining trust and delivering sustainable outcomes for clients, shareholders and regulators.

“The creation of this committee demonstrates Sequoia’s proactive approach to regulatory accountability, and I look forward to working closely with the team to uphold and strengthen the group’s AFSL governance framework.”

Sequoia also added former IG Markets Asia-Pacific managing director Matthew Wilson as the independent chair of each of the AFSL investment committees.

Wilson also boasts a long career in financial services, having headed up IMG Sports Technology Group and previously holding a number of stockbroking and investment product development senior executive roles at Deutsche Bank.

The firm said his “expertise across advice, stockbroking and product development will be critical in supporting the governance and oversight of each licensee’s Approved Product List”.

Wilson said he would provide “independent oversight and review processes to determine relevant research providers, ratings agencies and investment sources it incorporates.

“This ensures the Approved Product Lists (APLs) advisers rely on are robust, well-vetted and aligned with the highest level of risk and compliance standards,” he said.

“This additional oversight will empower advisers with the tools and research they need to deliver high-quality, client-centric advice. I am committed to supporting each AFSL’s investment committee with best-practice governance frameworks that reinforce consistent and strategic decision making across the group.”

The pair will not be alone on the committee, with CEO Garry Crole, head of licensee and adviser services division Darly Stout, head of legal Justin Harding, director of Sequoia Wealth Management and Sequoia Asset Management Hamish McCathie, senior risk and compliance manager AFSL licensing Mark Hutchison, and head of InterPrac compliance operations Steve Kallona also serving as members.

According to Crole, the committee represents a “major step forward in our commitment to governance excellence”.

“Danielle’s deep regulatory insight and proven leadership will provide premium oversight to our licensing businesses, reinforcing our ability to meet and exceed stakeholder expectations,” he said.

Compliance under the microscope

The licensee’s conduct has been under heavy scrutiny, with questions around not just its authorised representatives’ conduct in funnelling client money into the funds – both of which are in now in the process of liquidation in attempts to recover some of the roughly $1 billion in assets they purportedly held – but also apparent conflicts of interest.

Keystone Asset Management, the responsible entity for Shield, provided a $15 million unsecured loan from a sub-fund to New Quantum Holdings that helped facilitate its acquisition of Morrison Securities from Sequoia.

Sequoia denied any wrongdoing, telling ifa: “Sequoia sold Morrisons Securities to New Quantum on standard commercial terms. How New Quantum funded the acquisition was its own responsibility, and not something Sequoia had visibility over.

“It is important to clarify that the owner of New Quantum – who facilitated the Keystone loan – is the same entity that operated the superannuation platform which accepted member funds into the Shield Fund.

“The relevant connection to the Shield Fund lies with that platform and its trustees, not with Sequoia. Sequoia and InterPrac were not involved in the Keystone loan arrangement, product approvals or investment decisions within the New Quantum superannuation platform.”

However, this is not the only potential conflict of interest facing the firm, with SQM Research being a corporate authorised representative of InterPrac from May 2023 to June 2024, during which time it provided a rating to both Shield and First Guardian.

Sequoia Asset Management, one of the firm’s other AFSL’s, also authorises Australian Practical Superannuation, which is among the super funds that included First Guardian on its APL and into which Venture Egg had advised clients rollover their current super.

There are also concerns around Merhi’s ownership of lead generators that directed clients to his firm and received at least $13 million from First Guardian, however Sequoia told ifa it was “unaware of any ownership by Ferris Mehri in the marketing companies which were used to generate Venture Egg’s business leads at the time”.

“Once unusual volumes were observed being invested into the Shield Master Fund and First Guardian Master Fund, InterPrac prudently placed Shield on hold in June 2023, months before any rating downgrade, and never reinstated it, even after a brief rating uplift,” a spokesperson said.

“InterPrac also moved First Guardian to hold status between June and September 2023, despite its investment-grade rating at the time.

“As the ASIC investigation into Keystone Asset Management, the responsible entity of the Shield Master Fund, and Falcon Capital, which oversaw the First Guardian Master Fund, is continuing, InterPrac is unable to provide further information at this time.”

The company has also seen large volatility in its share price on the ASX, suffering a steep decline of around 30 per cent last Monday, dropping from $0.34 to $0.24 – its lowest price since 2020.

Following a trading halt that was lifted on Wednesday morning, its price has rebounded somewhat to $0.295 at close on Friday.

However, the exodus of substantial shareholders has continued, with The Australian Wealth Advisors Group (AWAG) disclosing on 30 July that it has sold off the vast majority of its remaining holding.

On 15 July, AWAG disclosed that it had reduced its ownership stake in Sequoia from 18 per cent to slightly above 15 per cent.

While AWAG did not wish to comment on its individual trading decisions at the time, a spokesperson for the firm told ifa that there are “challenges ahead” for Sequoia.

The latest move saw AWAG sell shares equating to around 12 per cent of Sequoia, dropping it below the 5 per cent benchmark to be considered a substantial holder.

AWAG had only bought into the firm in February.

Acorn Capital had also previously significantly reduced its holding, disclosing on 13 June that it was no longer a substantial holder following a series of trades since April.