First EQT but ASIC lines up other Shield targets

ANALYSIS

The Australian Securities and Investments Commission (ASIC) has targeted Equity Trustees Superannuation Limited as its first major litigation target resulting from the Shield Master Trust failure, while outlining who else should brace for regulatory action.

It will not have been lost on Equity Trustees, that ASIC also noted that the company is also the subject of an “ongoing investigation in relation to the onboarding and ongoing monitoring of the First Guardian Master Fund.

At the same time as announcing the start of Federal Court action against the superannuation businesses of Equity Trustees, ASIC also detailed who it is investigating stating:

“ASIC is investigating the circumstances surrounding Shield. ASIC is investigating Keystone Asset Management Ltd (in liquidation) (the responsible entity for Shield), its directors and officers, the role of the superannuation trustees, certain financial advisers who recommended investors invest in Shield, the lead generators, and the research house.”

The lines of investigation ASIC says it is pursuing represent a substantial portion of the investment management food chain in Australia, but by no means all.

It is therefore worth noting other elements of ASIC’s announcement yesterday where it said:

“ASIC understands that, since February 2022, funds totalling more than $480 million have been invested in Shield by at least 5,800 consumers, who accessed Shield primarily through superannuation platforms, the trustees for which were Macquarie Investment Management Limited and Equity Trustees.

“The investigation to date suggests that potential investors were typically called by lead generators and referred to personal financial advice providers who advised investors to roll their superannuation assets into a retail superannuation fund available on a choice platform and then to invest part or all of their superannuation into Shield.”

The tenor of the action mounted by ASIC against EQT makes clear that the regulator sees superannuation platforms as needing to live up to their obligations in terms of being gatekeepers.

ASIC deputy chair, Sarah Court said that instead of acting as an effective gatekeeper, ASIC would be alleging that EQT “allowed thousands of members invest to in Shield which had no track record. Those members ultimately saw their super balances eroded.

“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,” Court said.

ASIC alleges Equity Trustees failed in relation to Shield:

• to exercise the same degree of care, skill and diligence as a prudent superannuation trustee would
• to act in the best financial interests of its members
• to do all things necessary to ensure the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly.