Questions raised on Shield, First Guardian audits
Attention around the collapse of the Shield and First Guardian Funds has turned to the role of auditors in circumstances where audit reports did not point to concerns about the schemes until mid 2024.
Financial Newswire has sighted a compliance plan audit report for the Shield Master Trust filed with the Australian Securities and Investments Commission (ASIC) in July, 2024, covering the financial year ending 30 June, 2023, for an audit undertaken by reputable firm, BDO.
It was in that report that BDO said that the directors of Keystone Asset Management as the Responsible Entity (RE) for the Shield Master Fund had not provided BDO “with access to information that we require to form our opinion, including but limited to all books and records of the Company including related party transactions/balances, legal advice and corporate documentation”.
“The Responsible Entity have not met the requirements of their compliance plan in numerous instances during the year ended 30 June 2023, including, the financial reporting and lodgement obligations of itself as Responsible Entity or the Scheme it manages for the year ended 30 June 2023 (and half years ended 31 December 2022 and 2023 for the scheme),” the BDO audit report said.
“Various Financial Requirements for Cash Sufficiency throughout the year ended 30 June 2023 including that calculations were not approved by the Directors for the December 2022 quarter, all quarters the cash needs calculations were not prepared on 12-month forecast, did not include the stated assumptions underlying the forecasts as required,” it said.
Louis Christopher, whose research and ratings firm, SQM Research, has been subjected to criticism over its rating of the Shield Fund said auditors are key gatekeepers and the accuracy and timeliness of their reports are a fundamental part of making a ratings assessment.
He pointed out that the BDO report in question had in fact only become available after SQM Research had actually downgraded the Shield Fund based on its own inquiries.
Christopher restated an assertion that he made alongside Morningstar’s Manager, Research and Ratings, Matt Olsen, during Financial Newswire’s Advice Wealth and Super Conference in March that ratings houses are not auditors.
Examination of the audit of the First Guardian Master Fund via its Responsible Entity Falcon Capital has also given rise to questions being asked of ASIC about the status of its scheme auditor, Audit Services Plus.
The query relates to ASIC’s own records showing that the firm was deregistered effective from 13 June, 2022 under Section 601AA relating to voluntary deregistration.
ASIC data shows, however, that audit reports for First Guardian continued to filed up to the middle of October, last year.
There are so many questions that this article generates, including:
The Shield and First Guardian matters represent huge failings of the regulatory regime and need to be subject to a comprehensive independent inquiry. At the moment, ASIC is obviously doing some form of investigation, however there just seems to be a progressive leaking of information that continues to paint this as a complete disaster. ASIC were one of the participant in this matter, and in the context of the severity of these collapses, it should not be ASIC that assesses their actions in managing the Shield and First Guardian cases.
The clients of these two investment schemes deserve an answer on how this happened and how it was allowed to happen.
ASIC is trying it’s hardest to do the usual and blame Advisers, whilst making a little noise about the whole failed chain involved.
Case closed from Corrupt Canberra.
For just once this whole mess may not fall only on Advisers.
Advisers need to refuse to pay CSLR and make MIS, Auditors, Responsible Entities, Super Funds, etc all pay for their failures.
As someone who’ll be paying for this via the CSLR….
This is a total joke.
Utter disgrace. Well done Canberra!
It can’t be the fault of the regulator, or the product provider, or the auditor or the research house. It is clearly the fault of the advice profession solely, as is anything else that goes wrong, despite the facts.
For everyone making a comment here – I recommend you all provide a written submission to Treasury.
Here is the link to submit a submission
https://consult.treasury.gov.au/c2025-673169
let them know how you feel