Alert issued over ‘industrial-scale misconduct’ in super-switching schemes

Australians should be on the lookout for rogue superannuation schemes amid fears tens of thousands of people have lost a total of more than $1 billion in retirement savings as the result of “industrial scale” misconduct.

The Australian Securities and Investments Commission took the unusual step on Thursday of issuing a public warning about the risk of these schemes and the tactics used by call centre staff and financial planners to pressure people into changing their super to a new fund.

Rashid Alshakshir is just one of the people under investigation by ASIC for promoting rogue super schemes. He denies any wrongdoing. Credit: Justin McManus

It cautioned that some of these schemes would appear to consumers as legitimate because they were being promoted by ASIC-registered financial planners and were being offered to investors through large and highly respected financial institutions like Macquarie or Equity Trustees.

Over the past two years, ASIC has commenced investigations into five of these superannuation funds that promised lower fees and similar investments to regular funds – such as the sharemarket.

The warnings follow revelations in this masthead that two of the schemes being probed by ASIC – the $500 million Shield Master Fund, operated by Keystone Asset Management, and the $480 million First Guardian Fund, overseen by Falcon Capital – had allegedly misused vast sums of investor savings to bankroll pet projects of their founders.

This allegedly included Keystone hosting events featuring appearances from celebrity sportsmen including NBA star Josh Giddey and boxer Floyd Mayweather.

The allegations are being contested, having been described as unfounded and unfair.

ASIC has alleged in court proceedings that both groups sourced investment leads from Melbourne cafe owner Rashid Alshakshir, who is suspected of earning more than $35 million promoting the schemes to investors. He has denied any wrongdoing or having any knowledge that the schemes were being inappropriately overseen.

Both funds have been frozen amid ASIC’s investigation and fears that tens of millions of dollars were paid out to “lead generators” who pushed these high-risk schemes onto consumers.

ASIC deputy chair Sarah Court said alleged misconduct involving rogue schemes was on an “industrial scale”.

“These are very sophisticated operations – this is not coming from a boiler room in Romania ... it seems to us this has been set up very deliberately for these purposes.”

ASIC deputy chair Sarah Court.Credit: Penny Stephens

“These are highly sophisticated schemes.”

Court said people were being sucked into these funds through various high pressure sales tactics.

She said this included telling investors that their current super fund was underperforming or offering to consolidate superannuation accounts for no fee. Other lures included running advertisements on social media to help people find their lost superannuation or get a super health check.

“It can be difficult even for experienced investors to spot the problems here and what’s really going on,” Court said. “So as part of this campaign, we’re calling on Australians to be on red alert for these high pressure sales tactics, things like clickbait advertising promises of unrealistic returns.”

Court urged people to ask call centre operators what commissions they were earning in encouraging investors to switch over, who the call centre operator actually worked for and who managed the fund.

She also urged people to take time and think over whether to move their super from a larger fund into these newer investment groups or to ask another, independent financial adviser what they thought about the offer.

Court said a key issue for ASIC and consumers was that in some instances registered financial planners and the funds being promoted were with top-tier managers like Macquarie or Equity Trustees – again giving the impression the funds and their operators were being properly overseen.

Venture Egg boss Ferras Merhi is also under investigation by ASIC over his group’s role in directing investors to the Shield Master Fund and First Guardian. He denies any wrongdoing.Credit: Chris Hopkins

As well as investigating the rogue funds and their operators, ASIC is also looking into the large investment managers that allowed these funds to be promoted on their platforms.

Court also said ASIC was working on action regarding the conduct of some of the financial planners promoting the funds as well as lead generators.

ASIC has already taken court action against the boss of the financial planning group that drove many of the investors into the Shield Master Fund and First Guardian scheme, former VFL ruckman Ferras Merhi, and his associate Osama Saad.

Merhi and Saad deny engaging in any wrongdoing and say they had no knowledge that the investments were not being properly overseen.

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