Mulino ‘very carefully’ considering Netwealth plea for support, EQT to follow suit

On Monday, Netwealth Group announced on the ASX that Netwealth Superannuation Services (NSS) has submitted an application to Financial Services Minister Daniel Mulino seeking financial assistance under Part 23 of the Superannuation Industry (Supervision) Act.

According to the statement, a total of 1,088 Netwealth members have a combined exposure to the First Guardian collapse of $101 million.

“Any financial assistance granted will be applied to restore the fund and to compensate impacted members,” Netwealth said.

“The application seeks to restore members to their position prior to the fraud occurring.”

Asked about the request at a doorstop interview on Thursday, Mulino confirmed that he had received the letter, calling it an “important request that I will consider very carefully”.

“I asked my department upon receiving that letter to provide me with a briefing. Once I’ve received that briefing I will then write to APRA, as I’m required to do under the act, for APRA’s views as the independent macro prudential regulator, and I will table that letter that I write to APRA in the parliament,” he said.

“So, I don’t want to prejudge where I will go in my consideration of that request, but I’m stepping through methodically, getting briefing from the department and then, in turn, as required by the act, I will write to APRA.”

The minister also acknowledged the hardship that victims have faced and stressed that the government is “taking this matter very seriously”.

“I’m taking this matter very seriously,” Mulino added.

“The other thing I would note is that the priority of the independent regulator has been to take all the actions that it can to protect investor funds. So that includes undertaking a range of actions, including licence cancellation, freezing funds, travel restrictions. It has taken actions against a number of the platforms in addition to those actions against financial advisers and others.

“I welcome the fact that ASIC through its various actions has entered into an agreement with Macquarie which has seen over $300 million of compensation go to the investors in Shield. And that’s a very substantial step forward. But I just want to preface my answer by saying that there are a number of actions underway.”

Equity Trustees also seeking government aid

During Equity Trustees Holdings’ annual general meeting on Thursday afternoon, managing director Mick O’Brien confirmed that the trustee would also submit a Part 23 assistance claim.

“ETSL is preparing to make a claim to the Minister for Financial Services under Part 23 of the SIS Act for financial assistance due to fraudulent conduct and/or theft that has occurred against the trustee and funds, and will seek full remediation for members. As has been reported in the media, Netwealth has made such an application in respect of its exposure to First Guardian,” O’Brien said.

“Part 23 of the SIS Act is designed for exactly these purposes, and we look forward to the various authorities prioritising action which establishes that such a fraud occurred.”

He also stated that the trustee would seek “remediation for members through the liquidation process”, which he added shows good signs of recovery for Shield investors.

“ETSL is also letting members know how they can access the Compensation Scheme of Last Resort, which may provide up to $150,000 compensation per member,” O’Brien said.

He added: “I would like to reiterate that we are all extremely disappointed by what has transpired in respect of the two failed managed investment schemes – Shield Master Fund and First Guardian Master Fund.

“I would also like to acknowledge the deeply difficult circumstances for individuals affected.

“We are providing support to members, with clear communication, and complimentary counselling services for those requiring them, exploring all avenues for member redress and we are committed to collective industry action to protect investor interests going forward.”

O’Brien also defended Equity Trustees’ due diligence process, adding that it “did not at any time recommend or direct member monies”.

“At the request of the platform promoters, ETSL instigated its process for listing of new managed investment schemes. It undertook due diligence to determine whether the schemes should be allowed on the platforms and available to members, which the schemes passed in both instances,” he said.

“This contrasts with the approach taken by the industry when offering direct securities to their members, which are less diversified than MISs but are nonetheless simply made available as part of an investable universe, in addition to all the managed investment schemes. Of course, these types of direct investment choices are available on almost every platform, many retail funds and most major industry funds in Australia.”