Netwealth has asked the government to help remediate First Guardian Master Fund victims by invoking an obscure legislative mechanism used to remediate clients of the Trio Capital collapse.
Netwealth subsidiary Netwealth Superannuation Services applied to Minister for Financial Services Daniel Mulino for financial assistance under Part 23 of the Superannuation Industry (Supervision) Act.
Part 23 applications may be approved by the minister if the fund suffered a loss from 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 application was made by Netwealth subsidiary Netwealth Superannuation Services.
It was used to remediate clients of the Trio Capital collapse in the early 2010s. The government then recouped its costs via a levy on the superannuation industry.
It is understood Equity Trustees are strongly considering this route as well.
There were 1088 Netwealth members with an exposure of $101 million in First Guardian and the application seeks to restore members to their prior financial positions before being rolled over into the fund.
In a statement the ASX, the company said it believes Falcon Capital, the responsible entity of First Guardian, had engaged in fraudulent conduct resulting in losses to the Netwealth Superannuation Master Fund.
“Netwealth believes fraudulent conduct by other entities and individuals has also contributed to these losses,” Netwealth said.
“While acknowledging that work by liquidators and ASIC is ongoing, Netwealth believes sufficient evidence exists to establish that losses arose from fraud and that Part 23 requirements have been met.”
Macquarie recently agreed with the regulator to reimburse Shield investors on its platform, purchasing $321 million in client holdings that would return investors to their financial position when they rolled over into the fund.
The ASX-listed wealth giant will instead recoup what it can from the liquidators, absorbing the rest into its balance sheet.
Like Macquarie, Netwealth was both the branded super fund and trustee involved, whereas Diversa Trustees and Equity Trustees were trustees for hire for various platforms.
“Given the complexity of events surrounding the First Guardian collapse, the minister’s consideration may take some time,” Netwealth said.
“It is premature to provide assurances regarding timing or outcomes. Any financial assistance granted may only partially compensate members for losses incurred.”
As with other trustees involved in the collapse of the failed funds, Netwealth is under investigation by the regulator.
“While Netwealth’s position remains that it complied with all relevant laws in making [First Guardian] available on its platform, should a claim against Netwealth be established, the company has the resources to honour any resulting legal or monetary obligations,” Netwealth said.
“We are continuing to work co-operatively with all relevant stakeholders including the government, the regulators and the liquidators to pursue the best possible financial outcomes for Netwealth members, whilst also supporting members’ wellbeing as the relevant legal and regulatory processes take their course.”
The full collapse of the Shield and First Guardian funds has affected 11,000 investors with a collective monetary holding of $1.2 billion.
ASIC acted against the funds – and advisers involved – due to concerns about an “industrial scale” pipeline of lead generators funnelling clients to advisers, who would then roll them over into the funds against their best interests.
The regulator was also concerned about the funds themselves, including conflicts of interests with investments and misuse of investor money for personal expenses such as luxury vehicles and residences.
ASIC started investigating First Guardian in February 2024 with an asset freezing order coming a year later; Falcon Capital, the responsible entity of First Guardian, had halted investor redemptions in May 2024.
