Equity Trustees, which is being sued by ASIC for due diligence failures by hosting the Shield Master Fund, will undergo a strategic review of its under-fire super trustee service.
Presenting its 1H26 results to the ASX on Thursday, EQT Holdings (the listed entity for the company) said the review was prompted by the super trustee service operating at lower margins than its other business lines like its trustee wealth service (TWS) and corporate trustee service (CTS), as well as regulatory risk and the preference for larger super funds to utilise inhouse trustees.
“We have all options on the table, and we see there is value in that business,” managing director Mick O’Brien told shareholders on Thursday morning.
TWS provides a specialist trustee service across health and personal injury, charitable, community and native title trusts, and estate management; while CTS provides responsible entity, corporate trustee and custody services to local and international fund managers and corporates.
Equity Trustees Superannuation Limited (ETSL), is being sued by ASIC for due diligence failures in hosting Shield on its platforms and not acting in best financial interests of members. APRA has also added licence conditions, including conducting an independent review of high-risk product onboarding processes.
The super trustee services contributed 19 per cent of total revenue and is the lowest margin business in the company, generating only 5 per cent of earnings.
“Superannuation had a challenging period, intensifying regulatory and litigation costs, while the underlying business remains strong,” O’Brien said.
“This has resulted in management attention to regulatory engagement… including the defence of the ASIC proceedings.”
The company expects the review process will take six to 12 months.
HUB24, which used EQT Holdings-owned HTFS Nominees, previously disclosed that it was in the process of acquiring the trustee to bring it in-house.
HUB24 managing director Andrew Alcock confirmed to Professional Planner on Thursday afternoon that the plan is still to acquire HTFS Nominees.
“We’re continuing due diligence, we’re continuing on forming up our license application [with APRA],” Alock said.
“It’s going to be a six-to-12-month process. It’s early days, we’re progressing nicely.”
EQT Holdings reported $20.5 million in net profit after tax (NPAT), up 67 per cent from the previous corresponding period.
EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin was 32.9 per cent but the company said without litigation funding and regulatory action, margins would be 35.1 per cent.
The ASIC litigation has resulted in $1 million of legal and adviser costs for the first half of FY26, net of insurance recovery, and an addition $1.1 million of legal and consultancy costs have also been incurred to address regulatory notices and licensee conditions.
Shareholders will receive a first half dividend of 56 cents, which O’Brien said was reflective of the earnings results.
“There is considerable uncertainty as to what would unfold in relation to the Shield and First Guardian matter and will take some time for that to unfold,” O’Brien said.
“I don’t think the dividend reflects anything about the confidence or not in the [ASIC] case. ETSL is defending that case and will continue to do that, but it is really a reflection of how well the business has performed in the course of six months.”
Equity Trustees has argued that it was the victim of fraud and there has been no suggestion to day of any related party arrangements with the advisers, lead generators or managers of the Shield and First Guardian funds.
But it comes as investors in both funds remain anxious over whether they will see their superannuation returned.
The company said its exposure is $73 million to Shield and $70 million to First Guardian. ASIC’s action against ETSL to date has only been focused on Shield and not First Guardian.
It has previously said it will apply for a government bailout application under Part 23 of the Superannuation Industry (Supervision) Act, but O’Brien said on Thursday that this would be a last resort.
“We’ll be doing all other actions first before we head down that track at this point in time,” O’Brien said.
“ETSL will continue to fill its trustee obligations and maintain service quality and governance standards.”
Equity Trustees was trustee for NQ Super and DASH’s Super Simplifier, which hosted Shield; while NQ Super/Freedom of Choice hosted First Guardian.
Equity Trustees has in the past said it raised its concerns with ASIC in October 2023 about advice provided by Venture Egg advisers and ceased to accept new investors advised by the firm around that time.
Venture Egg was led by Ferras Merhi, the adviser at the centre of ASIC’s investigations, an authorised representative of InterPrac Financial Planning which is also being sued by the regulator.
Shield and First Guardian grew due to a sophisticated network of lead generators that contacted people who used online “superannuation health check” advertisements, and it used high pressure sales tactics to refer people to financial advisers.
ASIC acted against the Shield and First Guardian funds over concerns investor money was being misused on high-risk investments, pet projects of the directors and personal expenses.
While ASIC has centred its investigation on the advisers, lead generators and managers of the funds, it is also taking action against SQM Research for inadequate research reports on the funds, as well as another trustee-for-hire, Diversa Trustees.
Macquarie and Netwealth, who were both trustees and platforms, have already settled with ASIC to remediate investors on their respective platforms.
InterPrac Financial Planning is also being sued by the regulator and Macquarie, Netwealth, CFS, AMP, BT and HUB24 have all restricted access to the licensee’s authorised representatives on their platforms.
The regulator has also banned several advisers from MWL Financial Services, which is also involved in court proceedings and has had its licence cancelled by the regulator.
