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The Australian Securities and Investments Commission (ASIC) is suing Equity Trustees Superannuation over alleged oversight failures at the collapsed Shield Master Fund in the first salvo against the superannuation sector for collectively putting at risk $1.2 billion in retirement savings.
ASIC has filed civil proceedings in the Federal Court against Equity Trustees, a subsidiary of EQT Holdings (ASX: EQT), which the regulator says could be a precursor to further action against other superannuation managers following separate investigations into the collapse of First Guardian Master Fund and Australian Fiduciaries.
The latest legal manoeuvre follows an investigation in July by Slater and Gordon Lawyers for a potential class action on behalf of thousands of investors who have lost their superannuation savings to alleged Ponzi schemes involving First Guardian Master Fund and Shield Master Fund.
Together, all three funds involve retirement savings totalling $1.2 billion and, when announcing the potential class action last month, the law firm said it was particularly concerned for investors in the First Guardian Master Fund due to a potentially "substantial shortfall of recoverable assets".
In the civil penalty case announced today, ASIC alleges that, in relation to the Shield Master Fund, Equity Trustees had failed to exercise the same degree of care, skill and diligence as a prudent superannuation trustee would and to act in the best financial interests of its members.
It further alleges that Equity Trustees failed to do “all things necessary to ensure the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly”.
As superannuation trustee, Equity Trustees oversaw the investment of around $160 million of retirement savings into Shield over 2023 and 2024 through its fund.
ASIC deputy chair Sarah Court says ASIC is taking action against Equity Trustees as part of its ongoing work to protect members’ superannuation savings.
“Instead of acting as an effective gatekeeper for its members’ retirement savings, ASIC alleges Equity Trustees allowed thousands of members invest to in Shield which had no track record,” says Court.
“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.”
ASIC alleges that Equity Trustees, which has about $88 billion in funds under management and around 800,000 members, contravened both the Superannuation Industry (Supervision) Act and the Corporations Act.
After halting new offers of investments in Shield in February 2024, ASIC later took action to secure the assets held within Shield.
ASIC says that, since February 2022, funds totalling more than $480 million were 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,” says ASIC.
The investments regulator is investigating the circumstances surrounding Shield, including its responsible entity Keystone Asset Management, which is in liquidation.
ASIC also has an ongoing investigation into Equity Trustees in relation to the onboarding and ongoing monitoring of the First Guardian Master Fund.
In a statement to the ASX this morning, EQT has acknowledged the civil action by ASIC in relation to the Shield Master Fund.
“Equity Trustees recognises the deeply difficult circumstances for individuals affected,” says EQT managing director Mick O’Brien.
“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.”
The company says Equity Trustees “continues to support impacted members by taking steps to maximise their recoveries from the liquidation process”.
Shares in EQT were trading 8 per cent lower at $30.67 at 11.59am (AEST).
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