Since the Australian Securities and Investments Commission (ASIC) halted new investment in Shield Master Fund – a registered managed fund promoted by Keystone Asset Management – and made interim stop orders on four product disclosure statements in February 2024, scrutiny has largely focused on Keystone Asset Management director Paul Chiodo.
The stories practically write themselves when the corporate regulator makes allegations that investor funds paid for lavish expenses like a penthouse in Chiodo’s wife’s name and an event with boxer Floyd Mayweather.
But while the media focused on Chiodo’s seemingly expensive lifestyle, ASIC shifted its focus to advice firms responsible for placing clients into his doomed fund.
This eventually led to a Federal Court order, freezing certain assets belonging to Ferras Merhi who controls Venture Egg Financial Services – both authorised representatives of InterPrac Financial Planning. Interestingly, he also controls Financial Services Group Australia, which is an Australian Financial Services Licence (AFSL) holder.
However, Merhi is no longer under the Interprac banner, with the Financial Advisers Register now showing he ceased on 31 May.
Similarly, Ferras Merhi Pty Ltd & United Financial Advice Pty Ltd, which trades as Venture Egg, also ceased to be a corporate authorised representative of InterPrac on the same day.
In April, Garry Crole, managing director of InterPrac’s parent company Sequoia, told ifa that the firm is working with ASIC as it investigates Merhi and Venture Egg.
In an ASX release at the time, Sequoia acknowledged that “ASIC has commenced an investigation into suspected contraventions of the Corporations Act and ASIC Act 2001 by Interprac and/or its representatives”.
The ASX listing also confirmed that InterPrac was assisting the regulator to ensure that the “interim freezing orders have not been, and are not, breached by Mr Merhi and/or other of his associated entities”.
Moreover, it said it was reviewing the “obligations of the rating authorities with respect of the funds”, and its obligations related to the “advice provided compared to the performance of, and conduct engaged by, the funds”.
Sequoia added at the time that it would consider the obligations of trustees, auditors and custodians of the funds, the obligations of platform providers through which the investments into the funds were made, and review its operations and systems.
While Crole told ifa that he could not “provide any additional information at this point in time”, he noted that the Shield and First Guardian situation was “an extremely complex matter”.
According to Merhi’s previous media comments, Venture Egg has about 5,000 clients with $250 million in Shield, and 3,600 clients with $192 million invested in First Guardian, putting the total exposure for clients to over $440 million.
Evidently, the result of this investigation has been the ending of InterPrac’s relationship with Merhi.
The confluence of transactions
While the situation surrounding Merhi, Venture Egg, and Shield is particularly complex – as noted by both Crole and ASIC chair Joe Longo – the network of licensee “substantial holders” is also growing increasingly tangled.
While not directly tied to the potential Venture Egg mess, over the span of just two days in late May there was a spate of transactions announced on the ASX connecting Sequoia and Centrepoint Alliance.
First, COG Financial Services got out of the Centrepoint business, offloading its roughly 20 per cent stake in the firm on 21 May, having originally nabbed this holding from ClearView in November 2023.
That news hit the ASX at 4:49pm and was followed at 9:09am the next morning by the announcement that Australian Wealth Advisors Group (AWAG) had taken a 15 per cent ownership in Centrepoint.
This is where things get convoluted – AWAG currently holds an 18 per cent stake in Sequoia following a February transaction.
At the time of that transaction, Sequoia held 6 per cent of Centrepoint through its wholly owned subsidiary Sage Capital Group.
However, on the afternoon of 23 May, Sage announced to the ASX that it had increased its holding in Centrepoint to 16.5 per cent.
A few minutes later, Thorney Investment Group disclosed it had shed around 5 per cent of its holding, though it still retains almost 22 per cent of Centrepoint’s shares.
Despite the staggered disclosures, the ASX documents show all of these transactions took place on 21 May.
ifa does not in any way suggest that Centrepoint or AWAG played a role in Venture Egg, it simply wants to show how, what is considered a fragmented space, is actually closely intertwined.
AWAG, in particular, has been on a consolidation spree over the past 12 months under partnerships it refers to as equity partnership scheme (EPS) investments, with the firm earlier stating it is targeting six to eight by June 2025.
Whether this ongoing consolidation will lead to contagion risk – reputational damage naturally passed on by association – or regulatory complexity and therefore increased attention from the corporate regulator, is unknown.
But it’s worth remembering that just this year, ASIC commissioner Alan Kirkland said at an event that the interconnected nature of business models makes for a complex financial system, one in which consumer protection and financial advice become a “complex challenge”.
As a previous adviser for Interprac I can only speak highly of their AFSl and the quality of their compliance and business models compared to other licences I worked with in my 20 years in the industry.
Whilst i feel for these people and their hard earned…
They (interprac) can do all the due diligence in the world on their advisers, just like all license holders, but when potentially dodgy advisers sneak in under the ‘radar’ there is nothing you can do, and it’s incredibly hard to vet.
All the complex regulation in the world WILL NOT STOP IT. But this overbearing Labor government is also to blame for loosing good advisers with overbearing complex regulations instead of simplifying things.
Interprac as compliance organisation has the full responsibility and will be bankrupt. Start looking for another job. The governing body should have mechanisms in place to ensure their advisors act, operate and follow all Company, Super and ASIC regulations! That’s the job of Interprac. Failing to do that, they’ll face the full consequences of the law and that will result in Interprac most likely sitting with claims of $2billion coming their way. As mentioned before, Interprac should have been alarmed noticing ~ $1 billion flowing into these funds. The scale of gross negligence on their side, should result in the maximum penalty ever.
It’s devastating for people like myself who are semi retiring and no funds to do this now after heart and cancer patient.
There are now several lawyers that will take your matter to AFCA for you. They’ll claim the costs from what you recover.
The evidence ASIC has taken to court to end Venture Egg’s business, points at significant failures by Interprac. Interprac will follow the same route as Venture Egg, but most likely Board members and the CEO will go to jail as well. This is one, if not Australia’s largest frauds and lack of governance ever!
Won’t be surprised if a Royal Commission into the failures of ASIC commences as well.
There’s no way the government can afford 12,000 retirees that lost over $1.4billion will come onto the welfare system. That cost will be ten times more over a span of 20-30years.
Crole has already said in public this isnt a concern for interpract.
False, Interprac informed ASX they’re assisting and working with ASIC on claims against the company.
Crole is in denial as a jail cell is being prepared for him including every Board member of Interprac. Interprac is going be to struck down by reality, similar like Venture Egg. Next minute they fold. Investors should see the writing on the wall.
Venture Egg operated under Interprac without the required financial license. Interprac will be held fully accountable.
i am one of the many that have lost – is there nothing we can do as a collective to push the government to some action – i am now lodging a complaint, the first email i received was from interpac, they should be responsible as much as this ferras merhi
Lodge a complaint with Interprac, plus AFCA … Civil claims will follow. Also register for the Class Action against Macquarie.
Hey there what law firm is running the class action?? I think there should be one against Venture Egg as well, I am one of the 5800! Thank you.
Search Class Action Macquarie, the comment section removes links or naming the firm.
Interprac what a joke they are washing their hands of it. I have it in a letter.
Take them to court, 5,500 people will be doing it! No way Interprac is going to walk away from this without being bankrupt. Interprac failed their duties and ASIC will come after them. It’s only the start. The civil claims will be double the losses. Someone under significant stress that take their life, Interprac will be paying millions in compensation.
Interprac are washing their hands of this mess. They are claiming they had no part in what their members recommended as investments for the unsuspecting investors who were advised their money was invested in International, aus shares, fixed interest and listed property. I have the SoA from Interprac member Reilly Financial it’s damning. The advice was improper and as part of your member obligations to investors Interprac should have been all over this. But no they maintained relationships and even Shield investor money was used in their deal for Morrison. Talk about conflict of interest.
Interprac won’t survive this. They’re going to be drawn through AFCA and the courts by 5,500 customers. The claims will exceed $1billion. As the governing body they’re going to be punished the hardest as this was their job and their main job only! Some instances Venture Egg didn’t even met with clients but invested their funds by using a cookie cutter SOA. If Interprac is under any elusion they’re going to survive this, they’re in denial!
Not true, Interprac and the rating agencies (that rated the funds) are solely responsible for approving these funds for Venture Egg’s to invest in! Interprac as the governing body got sole responsibility for all investments under their licence. They are responsible to make sure these investments are prudent and meet their licensing requirements. Worst is, Corporation, ASIC and Super Legislations were all breached. Interprac not going to survive this.
Given the significant volume of funds being managed and the rapid increase in the number of financial advisers within a short timeframe, it is concerning that critical questions were not raised by the Licensee. Were proper audits being conducted on client files to ensure compliance and suitability of advice? Even if the research underlying the recommendations was credible at the time, was conflicted remuneration a key factor influencing the approval of certain products for client recommendations, particularly when compared to the hundreds of alternative and liquid investment options available?
Many clients didn’t even had reviews been performed. A cookie cutter agreement send to clients.
Interprac should be fined 100% of the investors losses and be forced to pay investors all losses of investments plus opportunity losses from the day their funds were frozen plus interest. This has caused 5,500 super fund holders endless stress and anxiety. The impact on families will be immense. The regulators should seek the highest penalty ever.
Platform that allowed this should also be forced to fund investor losses.
This result in loss of trust in super funds.
How would you calculate “opportunity losses”?
As if the funds were invested to perform as promised upfront. What similar amounts of investment would’ve produced if invested prudently from the date the funds were frozen until settlement occurs.
Interprac has several previous court cases against them. What will be considered are the timeframe these funds are frozen and what a prudent investment’s return ms would have been. Many of these investors are near retirement and those opportunity losses will be significant.
Apparently, there was more than one platform. Not good!
I have read on a previous IFA article that this company had thousands of clients invested in these funds through the Macquarie, upon reading a Reddit thread on this it seems the super platforms seemed to be happy to accept the funds until it became an issue via the media coverage. No doubt this company seemed to have been operating outside of what is acceptable, however what responsibility lies with the superfund trustee when they accept such a high level of business from one company.
The Federal Government needs to commence a Royal commission into the financial sector. With the commission having the power to issue arrest warrants and lodge criminal charges.
Also why ASIC was fast asleep on this.
Been there done that
Oh no – another Royal Commission. More talk, more regulation, more public servants. This is not the answer. Crooks will be crooks. And, ASIC are like the sherrif in a comedy, riding into town well after the crooks have left, saying “err, where did they go”.
I don’t understand how an industry can sit by after everything we’ve been through and still have licensees like Interprac operating this way. This has been an open secret for years – and just like Dixon and E&P before – we remain silent.
The super funds that allowed access and approved Shield and First Guardian as investment options should compensate their memebers for their losses in the same way an industry fund would have to do if it made an investment in to a failed product.
That’s not how Industry funds work.
Yeah, I didn’t see AustralianSuper making any refunds from its failed Billion dollar investment overseas
It 100% is… State Plus enforceable undertaking was paid by the membership collective.
The 1 billion dollar loss from the Australian Super plurasight investment loss will be paid for from the collective funds e.g member funds.
Why? People need to take their own risks when investing. Not ever investment works out the way we want it to.
You didn’t read the articles? It’s significant misconduct, breaches in Corporation And Super Legislation! This is NOT a downturn in an investment value due to poor investments. It’s FRAUD! The governing bodies will be paying all these losses plus opportunity losses and interest as if the investment were made as promised up front. The psychological impacts and losses will come through civil claims and may even be more than the half a billion $ losses. Not to mention the fines and penalties that will follow.
They’ll be forced by ASIC to pay all losses, as this is breaches in legislation and misconduct. I doubt Interprac is going to survive this. Macquarie will also be on the hook. The Compensation of last resort fund won’t be able to settle half a billion in losses, plus opportunity losses and interest.
This is not true. ASIC fines those responsible and bans them but very rarely do the consumers get any of their losses back
False! Where legislation were breached, the licensee’s insurance pay, but it’s most likely the $20million of insurance Interprac has will be insufficient. Interprac will most likely be bankrupt and go into liquidation. Just check their history on claims they had to pay out. Only after they’re liquidated will the Compensation as Last Resort Fund pay. This wasn’t a downturn in market conditions. This was misconduct on an epic scale with several breaches in legislation.
Your comment didn’t last long to be proven false. Macquarie agreed to pay all losses to those members that invested through the Macquarie Wrap platform in Shield Master. Macquarie is lucky they’re not getting fined. Interprac and others not acknowledging their wrong doing is going to learn the hard way. They’ll be dragged through courts and will be paying losses, opportunity losses, interest, damages and also get significant fines. Macquarie is getting the better deal as they came to realisation of their wrong doing early on.
100%
I have a lot of evidence about what happened to me with venture Egg, and reviewing it all now with the latest information is very troubling.
Yes, me also..40 and a bit years of super, looking like its gone..back to square 1 at age 57..
How mystifying, any and all emails from Venture Egg, just gone from my computer, so now l have nothing, and know nothing..all calls to 4 or 5 different numbers and an email, to get no response..
After reading some of these reports, its no wonder why..
Grin and bare it probably the best we can hope for.
I looked on the Venture Egg website. Seems like doors are closed. Very sad.
Happy to chat you through a process, there are ways to get the communication from Venture Egg.
I am extremely interested in this if you can help
Imagine being a director of a national industry body that lectures Canberra about red tape and over regulation, while presiding over 2 major advice failings having to be funded by advisers through the CSLR.
I can’t only assume the only reason any adviser would be licensed under Sequoia is because you can’t get licensed elsewhere
Very proud and happy Interprac Adviser.
Interprac isn’t going to survive this, that’s a certainty.
Is this sarcasm? Proud and happy? I appreciate happy given that advisers get no compliance supervision and can do as they like but proud of what?
Perhaps, you should refrain from assuming all 400 advisers can’t get licensed elsewhere – I chose Interprac because of Garry Crole
well there lies your problem
Exceptional journalism Keith and so many elements that will make all this one of the biggest stories of the year if not the decade. What is ASIC doing and when will they act? It is wonderful they are working with Interprac as noted by Crole but how is Interprac still operating without some kind of recognised enforceable undertaking like having competent compliance supervision of their advisers and stopping the other businesses under their AFSL using the same call centre business models as Venture Egg had?
Perhaps you should be questioning the professional. If Ferras was a doctor should you be blaming the doctor or hospital. It’s about time advisors in the industry take full responsibility for their actions as an advisor/financial planner & in Ferras case a business owner.
We can’t always just blame the licensee, product provider.
The governing body Interprac and Macquarie the platform provider all failed their responsibilities. Your example of the dr and hospital is laughable.
The real lesson of failures like these might be when independent compliance professionals tell you that you have a major problem that requires reporting and significant remediation, it may be prudent to give their opinion more weight than the casual reassurance offered by the licensee’s compliance team.
Why doesn’t government bite the bullet and seperate advice from products? It would allow all advisers to recommend products based on merit, not on related ownership.
Until this happens, these types of issues will continue.
How is this relevant here. Interprac, Ferras do not own keystone.
It is separate. Clearly you’re not an adviser.
Great article Keith. This is a really interesting story. Obviously Shield and First Guardian are going to be a big problem for Interprac and then for Sequoia, however what is going on in the background with all these share transactions? Advisers in these businesses deserve to know what is going on. I hope their licensees are keeping them informed. The world has changed since the introduction of the CSLR, and I think we will all be very interested to see where this mess lands.
I think the “advisers’ that worked here knew very well what they were getting in to..
ASIC should ban them all. Everyone!
Who will fund this mess? Likely, financial planners under the cslr so advisers get your wallets ready.
Should never have been allowed to happen, particularly with people’s retirement at stake.
I’ve lost everything. I’m turning 50 this year and have $6,800 in superannuation.
It’s advisers that were reporting this to ASIC through their compliance professionals in the first instance.
Nope, it was the collapse of Shield Master that resulted in this including investors working with ASIC over a year and a half already. Advisers had no idea…
Wrong! Venture Egg advisors were getting $$$millions in kickbacks from Shield and First Guardian to bring more investors in.