ASIC is suing Equity Trustees over alleged failures in due diligence of the now collapsed Shield Master Fund.
The regulator has started civil penalty proceedings in the Federal Court against Equities Trustees for its role in overseeing the investment of around $160 million of retirement savings into the Shield Master Fund, whose responsible entity is Keystone Asset Management, during 2023 and 2024.
Specifically, ASIC alleges Equity Trustees contravened s52 and s54B of the Superannuation Industry (Supervision) Act 1993 and s912A of the Corporations Act 2001
“Instead of acting as an effective gatekeeper for its members’ retirement savings, ASIC alleges Equity Trustees allowed thousands of members to invest in Shield, which had no track record. Those members ultimately saw their super balances eroded,” Sarah Court, Deputy Chair of ASIC, said.
“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 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 and to do all things necessary to ensure the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly.
“This is the first action against a superannuation trustee in relation to this complex set of investigations and we expect more cases to come,” Court said.
“Our first priority has been preserving assets for the benefit of investors, but the next phase will be holding key players to account,” she said.
Biggest Collapse Since Storm Financial
The collapse of Shield Master Fund and two other managed investment schemes form the biggest financial services failure since advice firm Storm Financial went into administration in January 2009.
Apart from the Shield Master Fund, which had $480 million in assets and 5,800 investors, the debacle also includes First Guardian Master Fund, which had $505 million in assets and 6,000 investors and Australian Fiduciaries, which had $160 million in assets and 600 investors, the AFR has reported.
ASIC first took action in February 2024, when it placed a stop order on four superannuation investment options of the Shield Master Fund. It was later placed into administration and liquidation over concerns about the management and financial health of the organisation.
“ASIC’s investigation to date suggests that many of those investors were called by lead generators and referred to personal financial advice providers who advised them to roll their superannuation assets into a retail choice superannuation fund, and then invest into Shield,” the regulator said on its website.
In some cases, self-managed super funds were established to invest the funds.
The receiver of the Shield Master Fund, Deloitte, estimated in November that the net assets attributable to unitholders only have a value of $206 – 239 million. The main issues were with the Advantage Diversified Property Fund, which was valued in the fund’s books at $300 million, but which Deloitte valued at no more than $25 – 60 million.
__________
[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.