Super trustees ‘catastrophically failed’ with Shield, First Guardian: SCA

Super Consumers Australia (SCA) chief executive Xavier O’Halloran has called the Australian Securities and Investments Commission’s (ASIC) lawsuit against Equity Trustees an “important test case for the consumer protections we have”, as the fallout of the Shield and First Guardian failures continues to grow.

On Tuesday morning, the corporate regulator announced it had commenced civil penalty proceedings in the Federal Court against Equity Trustees Superannuation Limited, alleging the trustee failed in its due diligence requirements over the inclusion of the Shield Master Fund on its platform.

“Instead of acting as an effective gatekeeper for its members’ retirement savings, ASIC alleges Equity Trustees allowed thousands of members to invest in Shield which had no track record. Those members ultimately saw their super balances eroded,” ASIC deputy chair Sarah Court said.

“Superannuation trustees play a critical role helping people save for their retirement. We expect them to do so with care and skill and put the interests of their members first.

“This action should send a clear message to superannuation trustees: proper due diligence is needed when offering investment options for members.”

SCA welcomed the regulator’s “strong enforcement action” against Equity Trustees, which oversaw the investment of around $160 million of retirement savings into Shield over 2023 and 2024 through its fund.

“By putting poison products on their shelves, Equity Trustees has catastrophically failed to do the right thing by its members,” O’Halloran said.

“This may result in the loss of over $130 million in people’s hard-earned retirement savings. Over 5,000 of Equity’s customers are now facing the terrifying prospect of having to work until the day they die.”

SCA also noted that none of the trustees that made either Shield or First Guardian available – Equity Trustees, Macquarie, Netwealth, and Diversa – have offered any compensation to their members for their lost savings.

“Super Consumers is calling on those funds to take responsibility for the harm they have contributed to and do right by their members,” the group said.

O’Halloran added: “Super funds are in a prime position to take rotten investments off the shelf, and we’re pleased to see ASIC holding Equity Trustees accountable for failing to protect people’s savings.”

In its filing, ASIC alleged that, in relation to Shield, Equity Trustees failed to exercise the same degree of care, skill and diligence as a prudent superannuation trustee would.

It also alleged the trustee failed to act in the best financial interests of its members and to do all things necessary to ensure the financial services covered by its Australian Financial Services Licence were provided efficiently, honestly and fairly.

According to ASIC’s statement of claim, filed with the Federal Court, Equity Trustee’s Superannuation Investment Office (SIO) “did not form its own opinion nor conduct its own analysis of the [Shield Master Fund]”.

The regulator also said that the SIO did not form its own opinion nor conduct its own analysis of Shield’s performance data for the SMF, whether a holding limit should be applied to the SMF and if so, the appropriate limit, nor whether a Level 1 or Level 2 approval was appropriate for the SMF.

Equity Trustees also “did not request, obtain nor consider a TMD with respect to the Balanced, Conservative and Growth classes of SMF”, ASIC said, nor did it “form its own opinion nor conduct its own analysis of the conflicts of interest and potential conflicts of interest present with respect to the SMF, and described those conflicts of interest and potential conflicts of interest as a positive feature of the SMF”.