ASIC reinforces Macquarie precedent via Netwealth

Mike Taylor

Managing Editor/Publisher, Financial Newswire

19 December 2025

ANALYSIS

By having Netwealth admit breaches of the Corporations Act with respect to the First Guardian Master Trust and then agreeing to compensation of $101 million, the Australian Securities and Investments Commission (ASIC) has reinforced the precedent it set with Macquarie.

That precedent sees the Netwealth superannuation fund members who invested in First Guardian compensated as a priority, just as occurred with respect to Macquarie.

This should alleviate a good deal of pressure on the already stressed capacity of the Compensation Scheme of Last Resort (CSLR) and appears to have become a clear strategy on the part of ASIC.

Macquarie investors have already received their compensation, and Netwealth informed the Australian Securities Exchange (ASX) yesterday that it would have compensated affected members before the end of January.

To do so, Netwealth will have to raise debt, confirming that the compensation will be recorded as an extraordinary expense on the firm’s first half accounts, “with an impact on net profit after tax of approximately $71 million”.

The company said the compensation will be funded through a mixture of cash and debt.

For Netwealth shareholders, however, the cost is not limited to the $101 million reflected in the total compensation bill because the company now needs to measure up to not only ASIC’s requirements but also the enforceable undertaking imposed by the Australian Prudential Regulation Authority (APRA).

That EU not only requires the appointment of an independent expert to review Netwealth’s platform investment menus and investment governance framework but involve cost in terms of developing and implementing “an uplift plan to address identified gaps and provide APRA with assurance or attestation that the remediation actions are complete and effective”.

It said that as part of the undertaking, Netwealth must also refrain from onboarding certain new high-risk investment options to the platform until the independent expert confirms the new option has gone through the uplifted onboarding process and an attestation is provided that all reasonable steps were taken to ensure the new option is in members’ best financial interests.

In other words, Netwealth is going to have to invest more heavily in its internal resources with respect to assessing whether funds can be made available on its platform.

This is against the background of admissions that, “having regard to the apparent nature and characteristics of the First Guardian Master Fund, it did not obtain and, therefore, did not assess sufficient information about the FGMF, or make sufficient independent enquiries, to understand or evaluate investment risk in the Diversified Class or Growth Class investment options prior to or while offering them”.

In its announcement to the ASX acknowledging the ASIC and APRA action, Netwealth sought to reassure shareholders that it “remains in a strong financial position with very high levels of recurring revenue, a strong EBITDA margin, and strong cash generation.

It went further, in suggesting that funds under advice flows would not be materially different from last year.

However, the company’s share price has been in decline since early August, down from $37.81 to just under $27 yesterday with only a flicker of positive movement after the company’s announcement.