Ferras Merhi’s Financial Services Group Australia advisers tipped clients into shares of microcap Sequoia Financial

Advisers operating under Financial Services Group Australia’s licence purchased 575,000 Sequoia Financial shares over two trading days in mid 2024. Those shares were placed in their clients’ portfolios.

Pictured are Euree Asset Management’s James Hird, Sequoia Financial CEO Garry Crole and Venture Egg and FSGA director Ferras Merhi.

More than 100 clients linked to financial adviser Ferras Merhi had their wealth directly invested in ASX microcap Sequoia Financial shares over the space of two trading days in June and July last year.

More than 575,000 shares were purchased by advisers operating under Mr Merhi’s licensee firm Financial Services Group Australia (FSGA) on June 28 and July 1, 2024, for a total purchase price of $273,500, documents seen by The Australian show.

FSGA was the licensee behind a number of advice firms now caught up in the Shield and First Guardian collapses, where $1bn of Australian superannuation savings are at stake. The Australian Securities and Investments Commission is investigating what could be the biggest fraud in Australia.

Mr Merhi also ran his own advice shop, Venture Egg Financial Services, under InterPrac’s licence. InterPrac is owned by Sequoia Financial.

At the time of the trades in mid-2024, Sequoia shares were trading at about 48c apiece. The stock last changed hands for 24c after it plunged on Monday, and was halted from trading on Tuesday. Sequoia is a $30m market minnow.

The Sequoia shareholding for those 100 FSGA clients is tiny, but raises questions as to the relationship between Mr Merhi, Sequoia and its InterPrac subsidiary.

Mr Merhi said FSGA’s investment committee allocated 1 per cent of some client portfolios to Sequoia Financial shares due to its compelling value proposition.

“At the time of purchase, SEQ was trading at a discount, had just sold Morrisons and had cash for investments. We expected a dividend yield exceeding 12 per cent, which is significantly higher than the market average,” Mr Merhi told The Australian.

“This combination of attractive valuation and strong income potential made it a prudent choice for clients seeking income-focused investments.”

Sequoia chief executive (and InterPrac managing director) Garry Crole denied any knowledge of FSGA client money being used to buy Sequoia shares.

He also said he had not discussed with Mr Mehri the prospect of investing Venture Egg and FSGA client money into another fund, Euree Asset Management, which is run by former Essendon footballer James Hird.

Mr Merhi previously told The Australian he had invested about $100m of client money into Euree since its inception in mid-2023.

As revealed by The Australian earlier this month, some Venture Egg clients had their superannuation savings transferred into the Shield Master Fund, the First Guardian Master Fund and Euree without their knowledge or direct consent, and despite statements of advice recommending other investments.

Mr Merhi and Venture Egg continued to be authorised representatives of InterPrac until May 31 this year.

The Australian is not suggesting any wrongdoing by Euree, InterPrac or Sequoia. A spokesperson for Euree has said it is a top performing fund since inception and that all redemption requests received had been honoured, and would be honoured going forward.

However, the First Guardian and Shield funds are frozen meaning clients cannot access their money, much of which is feared gone.

First Guardian Master Fund’s liquidators Ross Blakeley and Paul Harlond from FTI identified tangible assets of just $2.2m comprising cash and a Lamborghini Urus.

Sequoia is expected to publish a response to questions from the market operator on Wednesday, after The Australian late on Friday revealed that Shield investors unknowingly played a key role in ensuring Sequoia’s $40.5m sale of Morrison Securities succeeded.

These investors were put into the stricken Shield fund by advisers linked to Sequoia through InterPrac.

The Shield fund’s responsible entity, Keystone Asset Management, handed $15m to Morrison buyer New Quantum as a loan in mid-2023, three months after New Quantum agreed to buy 80 per cent of the securities business.

This loan was crucial to keeping the Morrison deal alive, coming shortly before the August 31 deadline for the purchaser to make its final $15m payment to ASX-listed Sequoia.

This $15m was Shield investor money, according to sources close to Shield and Keystone.

Earlier on Tuesday, Sequoia announced the departure of director and chair of its compliance committee, Charles Sweeney, effective immediately.

“Mr Sweeney has decided to step down from the board as it has become increasingly difficult for him to balance his other commitments with his non-executive role at Sequoia,” the firm said.

Originally published as Ferras Merhi’s Financial Services Group Australia advisers tipped clients into shares of microcap Sequoia Financial