ASIC chair Joe Longo flags reforms after Shield, First Guardian collapses
The corporate cop says it will work with Treasury and the government on options for reform in the wake of the First Guardian and Shield fund failures.
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The corporate cop has flagged the need for reforms following the Shield and First Guardian failures, that have put 12,000 investors at risk of losing up to $1bn in superannuation savings.
Speaking to The Australian on the sidelines of a banking conference in Sydney on Wednesday, Australian Securities and Investments Commission chair Joe Longo said both the corporate regulator and the prudential regulator would work with the government on reform options in the wake of the fund collapses.
“APRA and ASIC plan to work very closely with Treasury and government to look at policy options for reform. There’s some issues here that we think … might lead to law reform to ensure some of the things that we’re seeing aren’t repeated,” Mr Longo said.
“We’ve been in court over 40 times (for these cases); we’ve executed search warrants. It’s a very, very serious unfolding situation, and our priority is to freeze assets and hold people accountable.”
Shield collapsed in late 2024, while First Guardian followed this year. Both are currently under investigation for allegedly misusing investor money and ASIC is also investigating the role financial advisers, super trustees and research house SQM played in both cases.
Later on Wednesday, a spokeswoman for assistant treasurer Daniel Mulino said the government was engaging “regularly and closely” with ASIC on the issue.
“The Assistant Treasurer spoke to ASIC Chair Joe Longo about it on Wednesday morning,” the spokeswoman said.
“ASIC has taken a range of enforcement actions to preserve investor funds, including freezing assets, restricting travel of persons of interest, licence cancellations, banning actions and stop orders.”
ASIC chair Mr Longo’s comments came after The Australian revealed the regulator waited three years to investigate warnings about cold callers using high-pressure tactics to get people to switch super funds.
ASIC was warned in 2021 about one of the cold-calling companies that funnelled people into the advice firms caught up in the Shield and First Guardian fund failures, but the regulator only started investigating the call centre in 2024.
The regulator again dragged its feet on investigating First Guardian after it started probing Shield, an investigation by The Australian found.
ASIC’s probe into First Guardian and its responsible entity, Falcon Capital, did not begin until almost a year after it first started investigating the Shield Master Fund, despite both funds having exposure to failed property developer Paul Chiodo.
The corporate regulator commenced a formal investigation into the First Guardian funds in September 2024, seven months after it halted investments into Shield, and 10 months after it first started looking into Shield and Mr Chiodo.
Both First Guardian and Shield were marketed as diversified portfolios that were delivering higher returns than those available in industry super funds. They grew quickly, largely as a result of leads generated by call centres that were then transferred to financial advisers.
A handful of advisers tipped close to $500m of client money into each fund before they failed.
In some cases, advisers allegedly put client money into the funds without their knowledge, listing one set of investments on statements of advice before switching investor money into the now-collapsed products.
The 12,000 investors bracing for hefty super losses are now going through the process of making claims through the ombudsman, the Australian Financial Complaints Authority. If they are successful and their claim ends up with the Compensation Scheme of Last Resort, their payout will be capped at $150,000. Some people have lost more than $1m.
Law firm Slater & Gordon told The Australian it is considering filing a class-action suit on behalf of affected investors.
“It was really the first statutory report from FTI Consulting for First Guardian that confirmed for us that the numbers on the books will be nowhere near the amount of money that investors put in, and that there will be a substantial shortfall for recoverable assets. That’s really what made us feel like there might be a part for law firm to play here,” principal lawyer Andy Wei told The Australian.
“One of the most important things is for us to hear from more investors, particularly in terms of the documentation they received. There really is strength in numbers,” he said.
Originally published as ASIC chair Joe Longo flags reforms after Shield, First Guardian collapses
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