The Australian Securities and Investments Commission (ASIC) has alleged that Equity Trustees Superannuation Limited failed in its due diligence requirements over the inclusion of the Shield Master Fund on its platform.
On Tuesday morning, ASIC announced it has commenced civil penalty proceedings in the Federal Court against Equity Trustees which oversaw the investment of “around $160 million of retirement savings into Shield over 2023 and 2024 through its fund”.
“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.”
In the filing, ASIC alleged that Equity Trustees failed in relation to Shield:
- To exercise the same degree of care, skill and diligence as a prudent superannuation trustee would.
- To act in the best financial interests of its members.
- To do all things necessary to ensure the financial services covered by its Australian Financial Services Licence were provided efficiently, honestly and fairly.
“This is the first action against a superannuation trustee in relation to this complex set of investigations and we expect more cases to come,” Court said.
“Our first priority has been preserving assets for the benefit of investors, but the next phase will be holding key players to account.”
According to ASIC, Equity Trustees, as trustee for the AMG Superannuation Fund and Super Simplifier, approved the four classes of Shield as investment options on the NQ Super and Super Simplifier platforms.
In a statement on the ASX, Equity Trustees’ parent company, EQT Holdings Limited, said it is “considering ASIC’s claim carefully and will respond on the substance of the claim in due course”.
“Equity Trustees recognises the deeply difficult circumstances for individuals affected. We have fully cooperated with ASIC’s investigation and are carefully reviewing the claim,” Equity Trustees managing director Mick O’Brien said.
“Equity Trustees takes its compliance obligations very seriously and has robust processes in place to uphold the best interests of members.”
In February 2024, ASIC halted new offers of investments in Shield, before seeking asset preservation orders a few months later in June.
“ASIC understands that, since February 2022, funds totalling more than $480 million have been invested in Shield by at least 5,800 consumers, who accessed Shield primarily through superannuation platforms, the trustees for which were Macquarie Investment Management Limited and Equity Trustees,” the regulator said.
“The investigation to date suggests that potential investors were typically called by lead generators and referred to personal financial advice providers who advised investors to roll their superannuation assets into a retail superannuation fund available on a choice platform and then to invest part or all of their superannuation into Shield.”
Equity Trustees also included the First Guardian Master Fund as an option on super platforms it hosted, as did Netwealth and Diversa, with ASIC noting it also has an ongoing investigation into Equity Trustees in relation to the onboarding and ongoing monitoring of First Guardian.
Last month, ASIC’s Court said the regulator’s view is that if a trustee is hosting one of these funds, they “have an obligation to make sure that what is being offered through your platform is fit for purpose and appropriate for investors”.
The deputy chair referred specifically to Macquarie and Equity Trustees as targets for investigation, with the trustees providing Shield as an investment option on platforms they hosted.
Importantly, Court noted, for a sizeable portion of investors in these funds, the legitimacy of a firm such as Macquarie gave them confidence to proceed.
“I don’t want to overgeneralise, but at least some of the investors in the Shield matter are telling us that they thought that their investment was with Macquarie because it was sitting on a Macquarie platform,” she said.
“The fact that they had this underlying investment into this complex Shield Master Fund has come as news to them, and the documents that they saw, many of them had the Macquarie brand on them.
“So, we are very concerned about that, and we are investigating. I think we’ve been public about this before – I hope we have. We are certainly investigating Macquarie and Equity Trustees and considering what options ASIC has available to them to hold them to account for what we think are failures, or certainly, that’s the way our investigation is progressing.”
According to ASIC, it is seeking declarations and civil penalties from the Federal Court.
What about the little people that have invested in SMF – like me, who relied on advisors’ advice and now that everything has gone pear shaped no advice is forthcoming.
Some say to complain to AFCA or ASIC then other articles I have read is that you only have one shot at this and you have to get it right and that there is a timeframe to do it in.
At 54, I am assuming that I have lost everything and am starting again.
Paul Chiodo, I do hope that you and the assets you have probably put in your family’s name have all been stripped from you and that you have to start again.
I really feel for you — losing retirement savings at this stage of life is devastating. The hard part is that ASIC has banned the very advisers who were clients’ main point of contact, which means they’ve legally had to stop communicating. That silence only adds to people’s anxiety when support is needed most.
It’s also important to recognise that advisers weren’t acting in a vacuum. They relied on gatekeepers that legitimised Shield — the super fund trustees (Macquarie and Equity Trustees) and SQM Research, who rated it “Favourable.” The real damage came from Paul Chiodo’s management of the fund, but those large institutions, who had the duty and resources to protect investors, share significant responsibility.
ASIC should be putting equal, if not greater, focus on holding Macquarie, Equity Trustees and SQM Research accountable. They were the ones with the power to keep “poison products” off the shelf. Instead, the blame has been pushed onto individual advisers who were relying on information from sources that everyone was told they could trust.
Right now it feels like we’ve become numb to big institutions failing ordinary people, while the individuals at the coalface are punished. That imbalance only deepens the injustice for investors like you.
I feel for you screaming on the inside. I’m in a similar boat except I’m already 62yrs old. Hubby has no income & no super so it was all up to me. What burns the most is I made personal contributions which I could have used to pay off my mortgage. I only found out I had no super when I went to retire in December last year. Thankfully I was with great difficulty able to get my job back.
This is extraordinary. By law, a superannuation platform trustee must complete due diligence before any investment option is even added to the investment menu. The Shield Master Fund only appeared on the NQ Super and Super Simplifier platforms because Equity Trustees, as trustee, approved it. Advisers could not have recommended Shield until the trustee had already signed off on it.
So why are advisers the ones being banned, when the statutory gatekeepers are only now being held to account? SPS 530 and section 52(6) of the SIS Act make it crystal clear that trustees carry the responsibility for prudently selecting, monitoring and stress-testing investment options.
If Equity Trustees is now facing civil penalty proceedings, it reinforces that the system failed at the trustee level. Advisers relied on that system in good faith, yet have borne the brunt of enforcement.
Macquarie was also a trustee for Shield. Their turn will surely come.
The shield/first guardian fund is only a piece of the puzzle. The advisers, it appears, had additional non-compliance issues than just the fund selection.
Yes, there should absolutely be some blame on Macquarie and Equity Trustees as Trustees and the research houses for not conducting deep enough due diligence on the background and operations of these funds. That being said, as asset like that does not get added to the investment menu without strong requests from financial advisers who want to use it.
The system failed at many levels and unfortunately there are (really poor and completely unethical) advisers involved here who are equally to blame.
I am an adviser, and I hate seeing things like this because it unfairly tarnishes all other advisers with the same brush, but the blame does not rest on one party here. It rests on many, including some advisers.
So now the question is, if ASIC win this court case, where does the money flow to? To the CSLR to help compensate victims, or to general revenue?
Can ASIC confirm whether their court fees are to be paid by the financial adviser levy? If so, it just another slap in the face to advisers.
Under Prudential Standard SPS 530, what level of stress testing was completed?
Comparing the due diligence capabilities of a superannuation trustee with those of a salaried financial adviser operating under a licensee is just plain wrong. Trustees are directly accountable to regulators for systemic due diligence processes. Advisers operate at a retail advice level, where due diligence is mediated by their licensee’s infrastructure, however the advisers can be exposed if they fail to make reasonable inquiries or recommend products clearly unsuitable for the client. In situations like Shield and First Guardian—where fraud or deception was involved and official documents such as audit reports and PDS disclosures were inaccurate—the question is whether a financial adviser could reasonably have been expected to detect the misconduct.
Yep but let’s not forget IT’S ALWAYS ADVISER FAULT. NEVER ANY OTHER PARTY IN THE WHOLE CHAIN.
So when ASIC lose this case and others against Super Trustees.
Advisers will have to pay ASIC’s legal fees, increased again.
Plus Advisers pay all the CSLR.
Just saying…………..hope i’m wrong but useless ASIC don’t seem to win much.
The tip of a very dangerous and large iceberg.
Of course, the practice and the monetary incentives paid to the advisers, or (promoters) to funnel as much money as possible into these failed entities must be addressed with unrelenting persistence by the regulator as these people were the enablers of the river of money that has now disappeared.
The Licensees, the Advisers, the promoters, the Trustees and the individuals who were in charge of both the Shield and First Guardian Master Funds must be pursued and prosecuted to the full extent of the law.
Advisers are looking forward to acting as a litigation funders for ASIC to take this action, funding the CSLR tax to reimburse all clients affected and the next layer of red tape as a response to this product failure. The government looks forward to accepting any penalties in consolidated revenue, while still complaining about the cost of advice which they could easily offset.