ASIC sues Equity Trustees over Shield Master Fund due diligence
Instead of acting as an effective gatekeeper for its members’ retirement savings, Equity Trustees is alleged to have allowed thousands to invest in Shield, which had no track record.
The corporate regulator is suing Equity Trustees for alleged due diligence failures that allowed $160m to flow into the now-collapsed Shield Master Fund in the space of just a few months.
It is the first major legal action taken against the superannuation trustees who hosted the Shield Master Fund but unlikely to be the last, with Macquarie now bracing to be next in the firing line.
The Australian Securities and Investments Commission launched civil proceedings against Equity Trustees in the Federal Court on Tuesday, more than two years after the regulator began investigating the Shield fund and 18 months after it put a halt on investor funds flowing in.
The court action hit Equity Trustees’ share price: the stock plunged 13.5 per cent to $28.90 by the close.
“Instead of acting as an effective gatekeeper for its members’ retirement savings, ASIC alleges Equity Trustees allowed thousands of members invest to in Shield, which had no track record. Those members ultimately saw their super balances eroded,” ASIC deputy chair Sarah Court said.
“Superannuation trustees play a critical role helping people save for their retirement. We expect them to do so with care and skill, and put the interests of their members first.
“This action should send a clear message to superannuation trustees: proper due diligence is needed when offering investment options for members.”
ASIC flagged to The Australian in July the potential action against Equity Trustees and Macquarie.
Shield, a property-focused retail fund under investigation for allegedly mishandling superannuation money, collapsed last year leaving 5800 investors at risk of losing up to $480m in retirement savings.
The fund was offered on Macquarie and Equity Trustees platforms from early 2022 until the corporate regulator halted investments in February 2024. Over those two years, Shield grew from nothing to $480m in investor funds, all driven into the fund by a small handful of advisers.
An investigation by The Australian revealed this month that for the first year and a half, from February 2022 until June 2023, all of the Shield money – hundreds of millions of dollars – went on to Macquarie’s platform only.
Advisers only started sending investor money to Equity Trustees-hosted platforms NQ Super and Super Simplifier once Macquarie halted investments into Shield in mid-2023.
Macquarie stopped the fund flows due to concerns over the sheer volume of money flowing in and cookie-cutter advice being provided to clients.
ASIC was already surveilling Shield at this time.
Equity Trustees stopped accepting investor money into the fund six months later, in December 2023. By then, $160m had flowed in from a handful of advisers.
But the superannuation trustee knew something was amiss in October 2023 when it stopped accepting Venture Egg applications into the fund and reported Venture Egg to ASIC.
As previously revealed by The Australian, many investors didn’t even know their money was being put into Shield and another fund, the First Guardian Master Fund, which has also since collapsed.
Advisers would list one set of investments on statements of advice before switching investor money into the two funds. Up to $1bn of super savings is now feared lost between the stricken Shield and First Guardian strategies.
Shield was put into liquidation late last year and both the fund and its responsible entity, Keystone Asset Management, are under investigation for allegedly misusing investor funds.
The corporate cop is still investigating Macquarie, the financial adviser and research house SQM over the Shield and First Guardian failures.
As previously revealed by The Australian, Macquarie fast-tracked Shield’s addition to its investment platform after financial advisers promised to get at least $30m into the scheme in the first year. In reality, advisers put more than $300m into Shield through Macquarie’s platform over a 16-month period.
ASIC alleges Equity Trustees failed to exercise the care, skill and diligence of a prudent superannuation trustee; failed to act in the best financial interests of its members, and; failed to do all things necessary to ensure the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly.
Equity Trustees on Tuesday said it was considering ASIC’s claim carefully and would respond on the substance of the claim in due course.
“Equity Trustees recognises the deeply difficult circumstances for individuals affected. We have fully co-operated with ASIC’s investigation and are carefully reviewing the claim,” Equity Trustees chief executive Mick O’Brien said.
“Equity Trustees takes its compliance obligations very seriously and has robust processes in place to uphold the best interests of members.”
Equity Trustees reported its fiscal 2025 results earlier this month, revealing a 60 per cent surge in net profit to $33m.
ASIC is seeking declarations and civil penalties from the court.
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