Minister for Financial Services Daniel Mulino says he hasn’t ignored any warnings about regulating managed investment schemes (MISs), in light of the collapse of the Shield and First Guardian master funds.
During Question Time in Parliament on Thursday, Mulino was questioned by his shadow Pat Conaghan.
“I haven’t ignored any warnings,” Mulino said. “When I was notified of this matter earlier this year I quickly sought a briefing from my department in relation to the matter.”
The minister said he has written to APRA about what further actions are need in relation to platforms; to ASIC about whether capital holding requirements of MISs are sufficient; and noted the work the Financial Services Council is doing to develop best practice principles for trustee governance.
“Having been notified of these matters, I’ve asked my department to provide me with briefings in relation to how we might strengthen regulatory arrangements going forward,” Mulino said.
The opposition has taken issue with the government for “burying” the MIS review.
The criticism comes despite Labor governments frequently been considered soft in its oversight of industry funds, and of being too critical of the retail sector that includes financial advisers, platforms and MISs.
Mulino has held the portfolio since May, after Labor won re-election and he took over from Stephen Jones, who retired.
So far, Shield investors on the Macquarie platform have been remediated to the level of their original investment, in a deal with the regulator that would see the wealth giant purchase investor holdings with $321 million.
“I do acknowledge there is more work to be done and I continue to work with ASIC and with other regulators in relation to the immediate priority of protecting interests,” Mulino said.
Netwealth is the first trustee to put in a formal request for government assistance, invoking Part 23 of the Superannuation Industry (Supervision) Act.
Part 23 applications may be approved by the minister if a super fund suffered a loss due to fraudulent conduct or theft; the loss substantially reduced the fund, which caused difficulties paying benefits; and if the approval is in the public interest.
The minister told reporters on Thursday that he had received the application from Netwealth and will soon write to APRA about the next steps, amid Equity Trustees confirming its intention to make the same application after previous indications that would be the case.
The $1.2 billion collapse of the Shield and First Guardian master funds had left the retirement savings of approximately 12,000 people at risk.
Both funds – managed by separate parties – are accused by ASIC of misusing member money to invest in pet projects of the directors or to fund personal expenses including luxury housing and cars.
Some 140 advisers are under investigation, and the regulator has been in court against Ferras Merhi, whom it considers to be the central adviser to the case.
Merhi is alleged to have received money from both funds to help market them by using lead generators to funnel people into the products via advisers.
Merhi has since had his assets frozen – although the regulator has argued in court he has hidden some – and his travel restrained.
Except for ASX-listed Sequoia-owned InterPrac Financial Planning, ASIC has cancelled the licenses of licensees involved in giving advice, including Financial Services Group Australia which was owned by Merhi despite himself being licensed by InterPrac.
