Sequoia/InterPrac want court test of AFCA methodology

Mike Taylor

Managing Editor/Publisher, Financial Newswire

11 March 2026

ANALYSIS

First it was an exhortation for platforms to activate the Operational Risk Financial Requirements with respect to losses incurred as a result of the collapse of Shield and First Guardian. Now Sequoia is contesting the methodology of the Australian Financial Complaints Authority (AFCA).

The essence of Sequoia/InterPrac’s action is that financial advice delivered with respect to investments in Shield and First Guardian is only a part of the equation when other parties were involved.

The Federal Court action has the potential to test the largely uncontested approach of AFCA in assessing complaints and against the background of the Australian Securities and Investments Commission (ASIC) having already initiated legal action against multiple parties including platforms, Responsible Entities and research houses.

The approach is novel because while AFCA determinations are difficult to contest in a court of law, its methodology is open to challenge.

Sequoia on Monday signalled its intentions before yesterday confirming to the Australian Securities Exchange (ASX) that its subsidiary, InterPrac Financial Planning, has commenced proceedings in the Federal Court against AFCA.

The basis of the Sequoia/InterPrac action is AFCA’s final determination published on 24 December, last year, in connection with advice provided by an authorised representative of InterPrac relating to the Shield Master Trust.

According to the Sequoia release to the ASX: “InterPrac consider that AFCA did not adequately take account of the conduct of other parties connected with the Shield Master Fund when allocating responsibility for losses arising from the fund’s collapse in accordance with the AFCA Rules”.

“InterPrac considers that the determination highlights limitations in AFCA’s rules and processes when applied to matters involving multiple entities associated with the collapse of the Shield Master Fund and the First Guardian Master Fund,” the company said.

The Federal Court action must be weighed against the fact that the company is itself the subject of Federal Court proceedings initiated by ASIC alleging critical oversight and compliance failures with respect to financial advice around investment in the Shield and First Guardian funds.

The ASIC announcement in November, last year, stated:

ASIC alleges Interprac failed to:

• have in place an adequate process for approving financial products it allowed onto its approved product list, including Shield and First Guardian, and relied entirely on external research to add those funds to its approved investments list for advisers;
• respond appropriately to the use of lead generators (being Imperial Capital Group Australia Pty Ltd and AGAT Business Pty Ltd (in liquidation));
• respond adequately to news that payments had been made to Mr Ferras Merhi’s companies by entities associated with First Guardian and Shield;
• enforce or maintain a hold on new investments into Shield and First Guardian after Interprac’s Managing Director and Responsible Manager, Garry Crole, acknowledged serious issues with both funds;
• prevent the use of a ‘negative consent’ practice, which led to some clients’ superannuation being invested in Shield and/or First Guardian without express consent from those clients;
• respond adequately to significant inflows of investment into Shield and First Guardian;
• provide adequate responses to client complaints about advice from the Representatives to invest in Shield or First Guardian and instead relied on a ‘template’ response which often failed to consider the appropriateness of the advice; and
• respond adequately or impose meaningful consequences in response to serious compliance issues, including failings repeatedly identified in audits.