Sequoia had ‘no reason to doubt’ Shield and First Guardian: Crole

In Sequoia Financial Group’s full-year financial results webinar, chief executive Garry Crole has argued that “there was no reason for us to doubt that Shield and First Guardian were what they claimed to be”.

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.

Venture Egg has been the main advice firm under the regulator’s spotlight, with somewhere in the range of $440 million in client funds invested across Shield and First Guardian.

However, InterPrac also authorised both Reilly Financial and Miller Wealth Group, which had advised clients to invest in one or both of the funds.

Earlier in August, InterPrac of terminated its relationship with the practices, as well as Rhys Reilly’s other firm – The Life Insurance Company.

On Thursday, Crole said Sequoia had taken “decisive action on some breaches of three practices that we had within the network”.

“I worked very closely with the regulator and the clients of those particular practices, and I think that in 12 months’ time, a lot of the noise around that will have played out,” he said.

“We're looking to be very actively supporting the clients of those three practices, and we'll be announcing some strategies in respect to that in coming weeks. We've been working on some strategies to support clients, and we've employed a number of additional self-employed advisers within our salaried advice business to support those clients.”

Calling the licensee’s involvement in the Shield and First Guardian scandals the “elephant in the room”, Crole sought to reassure investors that the business was in good shape despite its potential exposure.

“We empathise with the clients who have investments on platforms within Shield and First Guardian. Clearly, it's not something that we saw coming. We believed that both Shield and First Guardian were reputable managers with reputable responsible entities with research that was a standard that we believed was high, with platforms who approved their products,” he said.

“What ended up occurring and becoming evident in First Guardian’s case in in 2025 and in Shield’s case in late 2024 when ASIC took the action they did was completely different than anyone's understanding.

“We took action very early. We took proactive action in respect to Shield in July 2023, so well before there was any noise about any impropriety on Shield of any kind. And in First Guardian’s case we took action in December 2023, so we stopped all new business completely from those platforms.”

The CEO argued that this was “not because we knew there was an issue”, rather simply down to the large volume of client allocation to the funds coming from a small group of its advisers.

“We were very, very early, and that was well before ASIC or the regulators, or any parties felt that there was an issue with Shield or First Guardian. We certainly didn't,” Crole added.

He also put much of the blame on other parties involved in the compliance chain, including the research house, auditors, super fund platforms.

“If you read the SQM research and you look at the quality of auditor, in particular Shield having BDO, the high-quality platforms that approved those products, there was no reason for us to doubt that Shield and First Guardian were what they claimed to be,” he said.

Additionally, Crole put forward the case that InterPrac advisers involved were recommending their clients into these funds through APRA-regulated platforms, adding that they offered more “protection”.

“They didn't invest directly, as some of the other cases did. You saw a lot of other licensees set up self-managed super funds and invest directly into Shield or First Guardian, and that offered those members very little protection,” he said.

“In our case, all of the funds under management is in APRA-regulated superannuation funds, and it is our belief that there's protection under APRA-regulated superannuation funds that we are looking to discuss with those members, and we have a client information pack, and we're writing to every single member at present, and we're talking to regulators and all of the parties at present in respect to how we can support those clients, and we're being proactive on that.”

The licensee has also learnt from the collapses, Crole added, particularly noting the need for the responsible entity and the manager to be separate parties.

“I think there's a learning in respect to independent trustees and independent REs, particularly for smaller new funds. We have had a learning from that,” he said.

“We've had a learning that the APRA-regulated superannuation system, which we truly believe in, does provide member protection far more than non-APRA regulated superannuation investments in this particular space, and we're learning from that.”

Earlier this month, Sequoia revealed there has so far been a total of $22 million in complaints against InterPrac Financial Planning over advice that its authorised representatives had provided.

“This represents InterPrac’s potential exposure prior to any assessment of the merits of each complaint, and before consideration of any recoveries or offsets,” Sequoia said at the time.

It also announced that it established a governance committee, with former ASIC commissioner Danielle Press coming on board as independent chair.