Trustees of the platforms that held the Shield and First Guardian funds made the choice to suspend adviser fees rather than await directive from the regulator, which is still in the midst of an investigation into Venture Egg and its principal adviser Ferras Merhi.
Despite action from the regulator against the Shield and First Guardian Master Funds, as well as freezing Merhi’s assets, the Venture Egg director still listed on the ASIC Financial Adviser Register, but Professional Planner understands the regulator has been investing Merhi and it will take some time before it can finalise a banning order.
A spokesperson for ASIC said the regulator is unable to comment on an ongoing investigation.
“ASIC has a range of enforcement tools available including banning financial advisers,” the ASIC spokesperson said.
“Please see our advice available on our website regarding how ASIC regulates financial advice including types of regulatory action and banning advisers, and also our INFO sheet 151 which explains how we approach our enforcement role and why we respond to breaches of the law in different ways.”
In a letter to clients, Venture Egg said some wealth platforms have “decided they will no longer pay adviser servicing fees” and have since referred clients to Infocus if they want to maintain an on-going advice relationship.
Shield was offered on three platforms: NQ Super and DASH, of which Equity Trustees was the trustee; and Macquarie Wrap.
First Guardian was offered on the OneVue and Australian Practical Superannuation platforms, of which Diversa Trustees was the trustee; along with Netwealth and NQ Super.
Macquarie declined to comment but Professional Planner understands that investors in Shield had been informed of the decision by the trustee to postpone the collection of adviser service fees as it was not in the best interest to do so.
A statement from Diversa said it can confirm it has suspended payment of advice fees to Venture Egg advisers across its products, but the action was not taken due to a direction from the regulator.
According to Equity Trustees, there are approximately 2800 investors in NQ Super and 70 in Super Simplifier who are not able to redeem their Shield units which are valued at an estimated $150 million.
“We are working closely with ASIC and Deloitte and fully support their investigations and will take all necessary steps to protect investor interests,” a spokesperson for Equity Trustees said.
Professional Planner understands the decision to suspend payments of advice fees was also a decision made by the trustee rather a directive from ASIC.
Netwealth did not reply to requests for comment by publication.
The Federal Court froze the assets of Merhi, who controls Venture Egg and United Financial Advice (otherwise known as Financial Services Group Australia or FSGA), in February.
Venture Egg and Merhi are authorised representatives of Interprac Financial Planning, while FSGA also holds an AFSL.
In an update to the ASX after market close on Monday, Sequioa confirmed they were aware of ASIC investigating the adviser, as well as entities associated with him, in connection to Shield and First Guardian.
The ASX disclosure said Interprac is assisting ASIC so the interim freezing orders are not being breached by Merhi or his associates; that it’s reviewing the “rating authorities” of the funds; as well as “considering” the obligations of the platforms, trustees, auditors and custodians of the fund.
In February last year, ASIC made interim stop orders on the Shield fund due to concerns there were misleading statements about Keystone Asset Management’s legal role in unregistered schemes the fund had invested in as well as not adequately disclosing the risks associated in those funds.
Over a two-year period, more than $480 million was invested into the Shield fund by thousands of clients.
Keystone is the responsible entity for Shield which is now in liquidation. ASIC has alleged a large proportion of the funds held had been directed to another fund connected to former Keystone director, Paul Chiodo, to fund property developments he was connected to.
The Federal Court froze assets of the fund in June, and ordered Chiodo surrender his passport and be restrained from leaving Australia.
ASIC also raised concerns the fund both failed to adequately disclose the performance fees that may apply and used inappropriate asset classifications to describe the investments in the underlying funds and the investments within those funds.
On March 18, ASIC announced another fund with ties to Venture Egg clients, First Guardian, would be wound up. First Guardian was accused by ASIC of investing in activities one of the trustee directors, David Anderson, had an “association or financial interest in” which the responsible equity failed to recognise and manage these conflicts of interest.
Falcon Capital Limited, which was the trustee of First Guardian, was also the trustee of the Chiodo Diversified Property Development Fund until June 2021, when Keystone took over as trustee.
On Thursday afternoon, ASIC announced First Guardian and Falcon Capital would be wound up.
