“Billions of dollars of everyday Australians’ retirement savings are now at risk, lost in the collapse of dodgy schemes like First Guardian and Shield, all of them so-called managed investment schemes,” Conaghan said last week.
“What were the recommendations? Could implementing those recommendations have protected these investors? Could they have protected hard-working Australians who have done the right thing and now have lost everything? We simply don’t know because this government has bizarrely buried its own report.”
Conaghan pressed the Treasurer in Parliament to “release the review, put the facts on the table and address this issue directly for Australians”.
The consultation, originally scheduled for August to September 2023, was due to deliver findings to government in early 2024 – a deadline that passed without explanation.
Pressed in February 2024, then Financial Services Minister Stephen Jones said the review was still ongoing, with Treasury “still looking into the things”.
Conaghan’s push for transparency comes as Liberal senator Jane Hume, chair of the economics references committee, effectively scrapped the Dixon Advisory inquiry by declining to have it readopted, despite widespread expectation it would resume following industry calls.
Against this backdrop of regulatory scrutiny, Sequoia Financial Group has reached out to investors affected by the Shield and First Guardian collapses, suggesting there may be a path to recover part of their losses through the Operational Risk Financial Requirement (ORFR), a safety net maintained by APRA-regulated super funds.
An email sent to clients of InterPrac-authorised advisers, titled “Important Update Regarding Your Superannuation Investment” explained that Sequoia’s legal and advice teams have submitted formal requests to trustees to consider whether the Shield and First Guardian issues warrant an ORFR payout.
“While we cannot guarantee a successful outcome, we believe there is a legitimate case and are committed to advocating strongly on your behalf.”
The email noted that since 2013, all APRA-regulated funds have been required to maintain ORFR reserves – described as a “financial safety net designed to protect members from losses that arise due to operation issues such as governance failures or investment menu oversight”.
“You may have noticed small ORFR-related deductions on your annual superannuation statements,” it added.
Sequoia reinforced its position in a media release, highlighting InterPrac Financial Planning managing director Garry Crole’s experience on the board of Diversa Trustees during the period when ORFR was enacted.
“This experience gave him unique clarity on the ORFR’s purpose as a safeguard for members,” the release said.
Crole said the collapse of Shield and First Guardian underscored “why the financial services industry must protect members whose retirement savings were lost through operational failures” and that use of ORFR “would reinforce trust in Australia’s wealth management and superannuation industries”.
“We request that the superannuation trustees immediately declare an ORFR event has occurred, and access their ORFR reserves to remediate every client that has been exposed to these investments. This would benefit every member that has been impacted by investment losses,” Crole said.
InterPrac, a wholly owned subsidiary of Sequoia, is among licensees potentially facing regulatory action for its role in the failed funds.
Under APRA standards, RSE licensees must maintain ORFR reserves sufficient to cover operational risks, with levels generally ranging from 0.175 per cent to 0.25 per cent of funds under management depending on fund size.
However, there is no obligation for trustees to release the funds, and it remains unclear whether Equity Trustees, Macquarie, Diversa Trustees or Netwealth will do so.
Reports in The Australian Financial Review on Thursday suggested that Macquarie could be in talks with ASIC to ascertain whether to pay compensation to customers that lost money in the failed Shield Master Fund.
The paper, which attributed the claims to “sources briefed on the talks”, said Macquarie is weighing up a customer remediation plan, but that this would not absolve it of any legal action the regulator may take in the future.
APRA and Equity Trustees declined to comment on enquiries from InvestorDaily’s sister brand, ifa.
Equity Trustees’ last public statement was in relation to ASIC announcing it had commenced civil penalty proceedings in the Federal Court against Equity Trustees Superannuation Limited, alleging it failed in its due diligence requirements over the inclusion of the Shield Master Fund on its platform.
In response, managing director Mick O’Brien said: “Equity Trustees recognises the deeply difficult circumstances for individuals affected. We have fully cooperated with ASIC’s investigation and are carefully reviewing the claim.
“Equity Trustees takes its compliance obligations very seriously and has robust processes in place to uphold the best interests of members.”
