FAAA: Higher NTA would not have stopped Shield, First Guardian

Mike Taylor

Managing Editor and Publisher

21 April 2026

The Financial Advice Association of Australia (FAAA) has questioned whether imposing net tangible asset requirements on responsible entities would have prevented the collapse of the Shield and First Guardian funds.

In a submission responding to an Australian Securities and Investments Commission (ASIC) consultation paper, the FAAA said it supported the application of capital and liquidity requires to stabilise managed investment schemes (MISs) but questioned whether it would have obviated the problems encountered by Shield and First Guardian.

“The FAAA supports the application of capital and liquidity requirements for responsible entities (REs). It is important for the stability of Managed Investment Schemes (MISs), that the RE has sufficient capital in order to remain solvent during a range of challenges,” it said. “The question is one of how much capital they need to have and what scale of events they should be capable of surviving.”

“The Australian investment market has observed a number of recent collapses, that have had a substantial impact upon consumers and more broadly on the financial services market. Unfortunately, whilst we have some awareness of the reasons for these collapses, we have little insight into the capital backing of these entities and ultimately what happened with respect to this capital,” the response said.

“The most prominent collapses have involved Shield (RE – Keystone Asset Management), First Guardian (RE – Falcon Capital), Australian Fiduciaries Ltd and Global Capital Property Fund (GCPF). GCPF was a company, rather than an MIS, so the issues and implications with capital backing are even less clear.

“We do not know if Keystone Asset Management, Falcon Capital or Australian Fiduciaries Ltd operated under the concessional or non-concessional NTA requirements. We do not know how much capital they had or what happened to that capital.”

“Evidently an RE with up to $30 million of fund assets, who is assessed under the concessional model only needs $150,000 of NTA. An RE with $500 million in fund assets would only need $2.5m of NTA,” it said. “These are not high levels of capital for the quantum of funds involved.”

“Given what we know about Shield and particularly First Guardian, it is evident that no reasonable amount of capital would be sufficient to withstand what happened to these MISs. Capital backing can never be a complete solution in the case of such large collapses.

Responding to the questions in the ASIC discussion paper, the FAAA said it would support indexing capital requirements to the consumer price index (CPI) but added, “it is highly unlikely that a CPI adjustment would make any meaningful difference when it comes to those recent major collapses”.

On the question of increasing the $150,000 under the net tangible asset (NTA) requirements, the FAAA said it would argue that the history of fund failure demonstrated that existing NTA requirements are inadequate but said that, without hard evidence, it is difficult to recommend an alternative higher minimum amount.

Dealing with the option to increase the $5 million cap under the concessional NTA requirement, the FAAA said there is merit in the proposal.

“This currently applies to an entity with $1bn of fund assets, meaning that no additional NTA would be required for REs with even more fund assets. That is not a lot of capital for MISs with a large amount of investor funds,” it said.