‘There was no cold calling’: Crole defends InterPrac compliance

The fund managers for Shield and First Guardian “deceived” everyone in the chain, according to the head of InterPrac parent company Sequoia, arguing the advice the licensee authorised “would have been appropriate” if the funds were as described.

“I think clearly the management of First Guardian and Shield are to blame,” Sequoia managing director Garry Crole said in an interview with ABC over the weekend.

While few would disagree with this sentiment, some of Crole’s other attempts to distance his firm from blame in the scandal might be met with more scepticism.

In the interview, the licensee boss stressed that InterPrac’s oversight of its authorised representatives was robust and it had received “no complaints whatsoever from any member in respect to the advice until after the failure of the funds”.

“Our oversight model is to, in respect to the advisers that we're talking about, is we look at the statements of advice that they give, we look at the recommended products that they make,” Crole said.

“We require them to do ongoing training on a regular basis. In all cases those advisers were doing that.”

Noting that InterPrac had stopped new business in the Shield and First Guardian funds in December 2023, “well before there was any discussion that there was something wrong with those funds”, he said the licensee had increased oversight on Venture Egg and Ferras Merhi.

However, Crole denied that there was any cold-calling or conflicted remuneration involved in the advice process.

“I want to make the point there was no cold calling,” he said.

“So, you know, the press and some of the interpretation about cold calling is not correct. Every member that went to Ferras or Venture Egg went onto a website from a marketing company who said, ‘Are you unhappy with your super etc’.

“They completed activities to get details of those clients, and those clients then requested somebody to call them, and that's when a Venture Egg or another client of these marketing companies would have called them. So, there was no cold calling whatsoever, but we were checking in on that.”

However, Crole failed to mention that Merhi himself controlled one of the lead generation companies, though the former adviser claimed on Channel 7’s Spotlight that he never actually received any of the $19 million paid to his marketing firm, claiming that “most of that money is with Google and Facebook”.

“I didn’t pocket this money. It’s not in my pocket. It’s money that was spent on these ads that were being put onto these platforms. They have most of that money, not me,” Merhi said.

Crole also revealed that his company has statutory declarations from Merhi that state he “was not receiving conflict of remuneration of any kind”.

“We didn't receive any conflicted remuneration. In fact, we took steps to stop it,” he claimed.

Despite taking action to halt new business being put into the now failed funds, Crole said he believed the high volume of flows into the products was simply a consequence of Australians being “unhappy with the superannuation system”.

“What I thought at the time was that those lead generators were finding people who are unhappy with the system and selling leads to advisers, and advisers would then give them appropriate advice. I thought that was good,” he said.

‘We don’t approve negative consent’

The reports of so-called “negative consent” being utilised among InterPrac advisers caught up in the collapses, in which the client was emailed an ROA that said no response within seven days would be considered consent, Crole was firm that the licensee did not approve the practice.

“The trustee did that. We did not do that. So, this happened in New Quantum’s case. New Quantum did that. They did not seek our approval. We did not know about this until after the event,” he said.

“Recently, they decided to ask us for that, and we did it on a one-off basis … after Shield and First Guardian had fallen. What happened is the client's money could not go into Shield because it was closed so cash was building up. That's inappropriate for the client. They had other portfolio investments, and we did approve it on one-off case, but the clients received a record of advice saying, ‘This is what we're doing. It's in your interest to do that.’

“If we didn't do that, their clients sit in cash ... it is in their best interest to be invested in the advice that they were given.”

What is clear from Crole’s explanation is that, whether InterPrac was aware of the negative consent practice from advisers it authorised or not, the advisers had utilised the method.

As the licensee had “increased oversight”, as he earlier argued, the licensee would still be liable for its advisers failing to obtained informed consent.

Despite this, and the corporate regulator describing much of the advice related to Shield and First Guardian as “cookie-cutter”, Crole maintained: “If the fund had been as it suggested it was, [the advice] would have been appropriate.”

He even argued the super fund trustees had not let anyone down, rather they had been “deceived”.

“I think the superannuation system in Australia is the best super system in the world. What I've been talking about of my recent time talks to that. But no, I don't think the super trust leaders have let people down.”