Macquarie’s Shield ‘watch list’ mistake

With 20/20 hindsight, the Shield funds should have been placed on the “watch list” that Macquarie Investment Management maintains for problematic products it has placed on the Macquarie Wrap platform.

In the legal statement of facts agreed between MIML and the Australian Securities and Investments Commission (ASIC), the fact that the Shield products never made it onto the “watch list’ represents the critical reason why the company has agreed to pay 100% restitution to affected investors.

If the Shield products had been placed on the ‘watch list’ they would have been subject to “additional focus for follow-up actions and further due diligence or performance monitoring”.

Once on the Wrap platform, MIML’s procedures required the ongoing monitoring of investment options as “a critical part of the investment governance process” stating this was “designed to confirm the ‘true to label’ and investment grade status of investment options, and to identify, through a risk targeted approach, those investment options which required additional scrutiny and follow up action to maintain their availability on the investment menu”.

The agreed statement of facts noted that the Shield funds had been added to the Wrap “without placing ay of those classes of the Shield Master Fund on a watch list”.

The document said that by 1 March, 2022, “MIML ought to have placed each of those classes of the Shield Master Fund on a watch list” but did not do so.

It said that because of this, MIML “failed to do all things necessary to ensure that the financial services covered by its financial services license were provided efficiently, honestly and fairly, and MIML thereby contravened s 912A(1)(a) of the Corporations Act.