ASIC closes in on action against Macquarie, Equity Trustees over Shield, First Guardian schemes

Vast sums being pumped into Shield and First Guardian funds should have raised red flags with Macquarie and Equity Trustees, ASIC’s deputy chair says.

Melbourne property developer Paul Chiodo was a director of Keystone, the responsible entity for the Shield Master Fund.

The corporate regulator is closing in on taking action against Macquarie and Equity Trustees for their role in the collapsed Shield and First Guardian managed investment schemes, with its investigations into the two firms to wind up as soon as next month.

Australian Securities and Investments Commission deputy chair Sarah Court said the regulator was looking at its options for holding Macquarie and Equity Trustees to account over the failed schemes, into which 12,000 investors tipped about $1bn over a two-year period.

The First Guardian Master Fund, which is currently in the process of being wound up amid allegations it mishandled more than $500m of investor funds, was available to investors on superannuation platforms hosted by Equity Trustees, Netwealth and Diversa, while the $480m Shield Master Fund, also being wound up, was available on platforms hosted by Macquarie and Equity Trustees.

“If you’re a super platform hosting one of these funds on your platform, in our view, you have an obligation to make sure that what is being offered through your platform is fit for purpose and appropriate for investors,” Ms Court said. “We are certainly investigating Macquarie and Equity Trustees and considering what options ASIC has available to hold them to account for what we think are failures. Certainly that’s the way our investigation is progressing.”

The investors caught up in the scandal were called by lead generators and referred to financial advisers who advised them to roll their super into First Guardian and Shield. In many cases, investors’ entire retirement savings were put into these funds, which ASIC alleges were mismanaged, with large portions of the monies misallocated to related entities.

The regulator will on Wednesday launch a campaign warning consumers to be on alert for high-pressure sales tactics, click bait advertising and promises of unrealistic returns that encourage people to switch superannuation into risky investments.

ASIC deputy chair Sarah Court says the regulator is close to concluding its investigations into Macquarie and Equity Trustees. Picture: Gaye Gerard

“If (a trustee) is faced with a sudden influx of hundreds of millions of dollars suddenly going into this little known fund that’s sitting on your platform, then surely that is sufficient to signal a red flag,” Ms Court said.

“We will be arguing, potentially, that a super trustee does have that obligation to look at the flow of funds that are coming through its platform.”

The regulator is aiming to finalise its investigations and make a decision on whether it will take action against the super trustees in the next month. Ms Court told The Australian ASIC wanted to send a message to the broader industry but was cautious of the risks in pursuing legal action against those involved.

“If ASIC takes on these actions and the court does not find in our favour and says, ‘Well, actually, it’s not the responsibility of the trustee or the research house or the adviser or the lead generator, well, then we’ve got some real ­issues here,” she said.

In the coming days, the regulator is expected to issue banning orders on a number of the advisers who herded consumers into these funds. Advisers and lead generators were paid hefty fees to push consumers into the funds, according to the regulator.

In the case of First Guardian, its responsible entity, Falcon Capital, whose directors David Anderson and Simon Selimaj were also running the First Guardian funds, handed in excess of $45m in fees to three marketing and lead generation companies between 2021 and 2023, with more than half of the money siphoned directly from First Guardian fund assets, according to the corporate regulator. The Federal Court this week made interim travel restraint orders against Mr Anderson and Mr Selimaj, prohibiting them from leaving the country until early next year.

The Federal Court also made interim orders freezing the assets of Mr Selimaj. Mr Anderson’s assets were frozen earlier this year.

Originally published as ASIC closes in on action against Macquarie, Equity Trustees over Shield, First Guardian schemes