The Shield Master Fund and First Guardian Master Fund scandals have, based on the latest numbers from the corporate regulator, impacted around 11,000 consumers with approximately $1.1 billion of funds invested.
However, this number could be set to soar, with Australian Securities and Investments Commission (ASIC) chair Joe Longo telling a parliamentary joint committee hearing into ASIC oversight that more funds are under investigation.
“I regret to inform the committee that it’s even more than that, because there’s a range of funds that we’re looking at, a range of investigations we’re looking at, and the number of investors that have been affected by this conduct, I would have thought, is closer to 25 or 30 thousand,” Longo said on Thursday.
In his opening address, the chair signalled that more enforcement action is on the way, stating it is “not just possible, it is increasingly likely”.
“We have cancelled the AFS licence of MWL Financial Services, and taken Ferras Merhi to court over his conduct, we have been in court more than 40 times already, executed search warrants, frozen assets and cancelled the licenses of advisers,” Longo said.
He added: “Our investigations into these high-risk super investment matters are complex and ongoing,” he said.
“They include numerous lines of inquiry and a large number of entities and individuals, including lead generators, financial advisers, advice licensees, superannuation trustees, the research house, auditors and the managed investment schemes.
“While our first priority has been preserving assets for the benefit of investors, the next phase will be about holding key players to account.”
‘Lawyered up’ roadblocks
Chief among the issues holding back ASIC’s investigations, according to Longo, is that the scale of misconduct has been a “very lucrative business”.
“A lot of the individuals – well all of the individuals and businesses – they’ve all made a lot of money. They’re well-resourced,” he told the committee.
“They’re all lawyered up; there’s not a lot of co-operation here.”
Deputy chair Sarah Court, also speaking at the committee hearing, said there are real concerns about the transitioning of a lead generation call to include a financial adviser
“This is where there is an issue in terms of, this is illegal for there to be cookie-cutter, perfunctory financial advice, but these are licensed financial advisers that are advising the superannuation member to move their super from one of the funds,” Court said.
“One of the myriad things we have been doing is banning and investigating. In fact, I think we had a paper at one of our commission meetings yesterday where there are 140 individuals that we are in the process of looking at.
“Twenty of those have already had court action, 50 of them are current investigations, and 70 more we have on the list.”
She added: “These are licensed financial advisers.”
Trustees under fire
Given the broadening scope of the already massive investor impact, it is unsurprising that the corporate regulator aims to establish clear boundaries for super fund trustee due diligence requirements when adding funds to their platforms.
Court said that, in ASIC’s view, trustees owe members a “range of duties”.
“We are of the view that the trustees may have failed in those duties,” Court said.
“We’ve taken court proceedings in the last few weeks against one of those trustees, Equity Trustees, and we are alleging that it has breached the duties that it owed as a superannuation trustee to those people that were able to invest through its platform or the platform it made accessible.
“That matter is before the court and being defended, but we are of the view that the trustees have an obligation to protect the members’ funds and act in the members’ best interests.”
The proceedings against Equity Trustees, which ASIC launched late last month, relate specifically to its inclusion of Shield on super platforms it hosted.
Longo explained that while the obligations on trustees are all established in legislation, “they’ve never been tested”.
“In the proceedings that we’ve already commenced, and there may well be more proceedings coming, we’re testing the standards of diligence that the superannuation trustee has to discharge before putting anything on their platform,” the chair said.
“The trustee can’t be putting products there that aren’t suitable.”
ASIC executive director of enforcement, Chris Savundra, told the committee that the regulator’s concerns, as far as they relate to super trustees, are not related to the misappropriation or misuse of investor funds alleged against Shield and First Guardian’s responsible entities, but the lack of adequate risk assessment.
“What we say is these funds had no track record, the individuals had no track records, so they were high risk,” Savundra said.
“The assets were illiquid, high-risk. So looking at it through that risk lens, the assessment should have been done.
“I don’t believe trustees were not putting Shield or First Guardian on their platform because they were aware that investor funds were being misused or misappropriated, and to my knowledge, no trustee raised those concerns with us. Those were ascertained through our investigative work.”
Court also noted that the different segments of the chain involved in the collapse are all blaming each other.
“We are certainly investigating at least one of the ratings houses that we are concerned had the Shield Master Fund rated as of investment grade or words to that effect, and indeed, one of the challenges with these matters is that in a sense, everyone is pointing fingers at everyone else,” she said.
“For example, the financial advisers are saying to us, ‘Well look, you can’t hold us accountable for this ASIC, because the ratings house had rated these funds, or at least the Shield Master Fund, as of investment grade.’ Super fund trustees are telling us the same thing, saying, ‘Well we relied on the ratings houses’ or ‘We relied on the fact that these members had financial advice.’
“So one of the challenges here is trying to pull all of this apart and work out where does liability lie. Our own view is that significant failures and likely contraventions of the law, certainly ones that we are proposing to take forward, in every link of this long chain.”
I sleep well at night – plain vanilla, low cost multi-asset index funds that aligned to clients’ risk profile-suggested asset allocations and objectives are a-ok!
Stop failing the public ASIC.
You haven’t even INTERVIEWED one of the three directors of the Shield Master Fund. What’s with that?
Wow, really must feel for the impacted clients, absolutely devastating for every one of them. Let’s just hope they can get necessary reimbursement in a timely fashion.
Just a slightly different slant (point of view). Really seems like a massive failure of the FASEA Code of Ethics given the number of advisers being investigated and interestingly this has not been mentioned in any of the articles I have viewed.
Perhaps the Values and Standards need some serious attention across the industry, not just the lip service I viewed in my time.
Well i am guessing the whole Target Market Determination (TMD) legislislation needs an overhaul??? Maybe that was another well intentioned waste of time and money?
How many hundreds of millions of dollars pumped into ASIC for them to have such an appalling track record?
I’d say that’s a lucrative business as well. Money for nothing. What service delivery are advisers getting for their ASIC fee?
Is this a breach of Standard 7?
When a financial adviser joins a new licensee, they are required to undergo rigorous vetting processes. These include police and bankruptcy checks, reference checks, verification of qualifications, compliance and audit reviews, and Continuing Professional Development (CPD) assessments. In some instances, advisers may also be required to complete a competency test to confirm their professional capability.
In Joe Longo’s speech “Forward Together: Addressing Misconduct in Financial Services” delivered on 30 July 2025, he remarked:
“The other point I’ll make is that Australia’s managed investment scheme regime is very permissive. The bar is so low to register one, it basically serves no barrier to entry at all. It doesn’t matter if the underlying asset is alpacas or meme coins—if the fund has a valid trust deed and disclosure document, ASIC has to register it.”
On the 18th of September 2025, during the Joint Committee hearing into ASIC, he further stated:
“A lot of the individuals—well all of the individuals and businesses—they’ve all made a lot of money. They’re well-resourced. They’re all lawyered up, there’s not a lot of co-operation here.”
This assumption—that all individuals involved made significant financial gains and were well-resourced—is entirely misleading. While such claims may ring true for certain directors of these businesses, who were alleged to have received conflicted remuneration, to suggest that all individuals benefited in this way is both reckless and factually incorrect. Many advisers had no such involvement or financial advantage directly linked to Shield or First Guardian, yet they are being unfairly grouped under this assertion.
Such statements highlight the seriousness of the regulatory environment and the reputational risks facing the industry, warranting the need for legal representation. If ASIC had longstanding concerns about these business models, and had been aware of issues years before the collapse of Shield and First Guardian, it is reasonable to ask: Were these businesses invited to enter into an Enforceable Undertaking? Furthermore, were any of the financial advisers employed by these firms questioned prior to the imposition of freezing orders?
Are ASIC staff going to chip in for their levy we pay because they have obviously been asleep at the wheel to let so many people get affected by defective funds? Certainly more at fault and deserving to cover the cost than I Am as a financial adviser doing the right thing by my clients.
Individual licensing has to be on the table. 140 people have to (potentially) face consequences of their actions. We cannot allow people to phoenix their businesses and careers while leaving the industry holding the bag.
ASIC could have stomped the campfire out when this was first reported to them, yet they allowed it to grow into a bushfire before doing something about it (again).
So here’s a controversial question?
Where does ASIC’s liability lie? Did they not licence Shield or First Guardian in any way? Register them as companies, accept the directors? Licence them to receive funds? ASIC licensed the advisers. Who registered the auditors? With all the excessive regulation in our society why did none of it work as intended?
There’s clear failings here, but what can we rely on in our society?
Seemingly that crooks can get away with practicing until the industry they operate in hounds the regulator to investigate.
It’s despicable that APRA-regulated trustees are now saying, “we relied on the fact that members had financial advice.” What justification did super funds have to put these products on their investment menus in the first place—before a single client was in them?
If trustees want to argue they relied on the ratings houses like SQM, then that’s their fight, not advisers’. This is nothing more than super funds trying to shift their own liability onto advisers so the CSLR foots the bill, rather than using their own operational reserves as the law intended.
If you can’t handle your obligations, you shouldn’t be an APRA-regulated super fund.
And let’s not overlook this: it was actually positive that advisers were recommending clients invest through APRA-regulated funds instead of SMSFs. That was the safer, more system-trusting path—and advisers are now being punished for doing the very thing that should have protected clients.
“The assets were illiquid, high-risk. So looking at it through that risk lens, the assessment should have been done.”
So why aren’t these types of illiquid assets considered high risk when it comes to certain other super fund trustees?
Seems a bit odd wouldn’t ya think?
Great coverage Keith. This will be going for years because despite the finger pointing, all are to blame. But where and when did it really start? And is it still going on, but the products being used have not collapsed yet? Were these products created first but without proper retail distribution simply used to meet the demand created through these call centre business models or superannuation comparison sites? The big tragedy is ASIC’s lack of speed to respond means those involved will walk away with millions and a banning order after they are retired. Will the lesson from all of this be that white collar crime really does pay because the reward is much bigger than the risk?
ASIC wondering why they are lawyering up? Aren’t they going in there trying to upend these people. I’m sure some have done the wrong thing but there are also others that have simply relied upon research houses, licensees (who freely take payments to get on APLs where advisers can’t). If ASIC did their job properly these types of schemes would never have gotten this far.
So long story short… the reforms off the back of the Royal Commission were basically pointless, made life super expensive for advisers trying to do the right thing, and those low life individuals continue to practice with no remorse… Oh, and the advisers doing the right thing also get the privilege of footing the bill for all these bad eggs??? What a world we live in.
Maybe consider reforming the best interest duty around advisers and factor in criminal elements where advisors have simply opted to increase their bottom line… At the moment this legislation is nothing more than an exercise in covering one’s ass.
ASIC as usual were completely absent when the battle needed to be fought and when the battle is lost they quickly swoop in to bayonet the wounded. Do they work for the consumers NO do they work for the Industry No. Just remember that all the money they recover in fines and prosecutions goes to consolidated revenue, so the industry is funding action to provide the Government with a dividend from the regulator.