ASIC will allege in court that Diversa Trustees failed to enforce a 50 per cent holding limit that was meant to be imposed on First Guardian Master Fund.
The regulator has commenced civil penalty proceedings against Diversa Trustees in the Federal Court alleging that it failed to enforce a 50 per cent holding limit on the First Guardian Master Fund, conduct adequate due diligence before allowing its members to invest in the fund or ongoing monitoring of it, oract in the best interests of members.
ASIC will argue in court that the trustee failed to put the systems and processes in place to ensure that there was compliance with the holding limit which would’ve prevented people from being totally rolled over into the failed fund.
Around $300 million was invested into First Guardian from 2020 to 2024 through superannuation funds for which Diversa was trustee, including Your Choice Super, Australian Practical Super and Praemium Super.
An announcement from Diversa said that it was currently in the process of preparing its application for government assistance to remediate clients and expects to submit the application before the end of the calendar year.
Netwealth had already made its application with the government and Equity Trustees previously expressed its intention to do so as well.
The action against Diversa leaves Netwealth as the remaining trustees to not have any announced court action against it. Macquarie settled with the regulator to remediate Shield Master Fund investors in full and Equity Trustees has chosen to fight the allegations in court.
In its announcement, Diversa said it has not altered its view that it considers issues that have arisen from First Guardian are due to fraudulent conduct.
“The relevant conduct only came to light long after applications for and withdrawals had been frozen by Falcon Capital, the responsible entity of First Guardian,” the announcement said.
“Diversa has been actively monitoring First Guardian since it suspended applications and withdrawals in May 2024 and has been working constructively with regulators since it became an area of focus leading up to the proceedings ASIC initially brought against Falcon Capital and in relation to First Guardian in February 2025.”
ASIC is seeking orders for compensation, declarations and civil penalties from the court against Diversa which deputy chair Sarah Court said is part of its commitment to seek compensation for the victims wherever possible.
“Our first priority has been preserving assets for the benefit of investors to the extent they are available, and now we’re taking action to hold those we consider responsible to account with 11 cases underway in the Federal Court against 19 defendants,” Court said.
APRA had already imposed additional licence conditions on Diversa in January 2023 to address concerns over the adequacy of the trustee’s resources to manage risks and meet regulatory and compliance obligations; heightened inherent business risks driven by the complex structure and operations of Diversa; and concerns regarding the ability of Diversa to deliver quality member outcomes, including in relation to high fees and poor investment performance.
ASIC launched action against Diversa in October 2021, alleging it failed to prevent an adviser from generating new business on the platform despite knowing the adviser was being investigated.
That adviser, Nizi Bhandari, was permanently banned by ASIC for telling consumers to make false statements to their superannuation fund trustees to gain early access to their superannuation balances and for giving personal advice while only being licensed for general advice.
Bhandari’s business, The Australian Dealer Group, operated a website called Australian Super Finder through which a consumer could request a search for lost superannuation.
The court found in favour of Diversa and said the trustee did not breach the law.
Diversa also received a $13,320 fine for greenwashing via Cruelty Free Super after ASIC issued an infringement notice in December 2023.
The collapse of the Shield and First Guardian funds has become one of ASIC’s highest priorities, with $1 billion of retirement savings across 11,000 investors at risk.
ASIC won stop orders against the Shield and First Guardian funds due to concerns of mismanagement of investor money, including the funding of pet investment projects of the directors or personal expenses including luxury cars and mansions.
Both funds are alleged to have paid advice firms who in turn used that money to pay for lead generation services to funnel customers into the funds without considering their best interests.
ASIC alleged financial adviser Ferras Merhi signed 6000 Statements of Advice that directed clients into the Shield or First Guardian products, failed to act in the best interests of clients, gave conflicted advice and provided defective Statements of Advice.
InterPrac Financial Planning, which licensed Merhi and other advisers involved, is being sued by ASIC along with another licensee MWL Financial Services. Several other licensees have already been cancelled by ASIC.
Merhi, who ran the Venture Egg advice business, also separately ran his own licensee Financial Services Group Australia. He’s also accused of receiving loans from the First Guardian fund to purchase one his advice businesses that far exceeded the purchase price.
SQM Research has also been sued by ASIC and is in court defending allegations it failed doing proper due diligence with its research reports.
