InterPrac Financial Planning is suing the Australian Financial Complaints Authority over concerns that the complaints authority has not fairly handled the complaints resolution process.
The proceedings were filed in the Victorian registry of the Federal Court of Australia last week. AFCA and InterPrac both declined to comment.
Professional Planner understands InterPrac has taken issue with the complaints authority’s approach to complaint determinations and that AFCA has not applied its own rules correctly.
In documents sent to AFCA prior to the court proceedings, seen by Professional Planner, InterPrac raised concerns with AFCA for not apportioning blame for the collapse, noting favourable ratings from SQM Research, performance data from FE Analytics which it believed it had no reason to doubt, and due diligence failures of the trustees involved.
AFCA has released one of the lead determinations for InterPrac which found that the product disclosure statement (PDS) for the Shield Master Fund was ignored, which warned against a sole allocation to its high growth option.
Professional Planner understands another lead determination centred on advice given about First Guardian Master Fund will be published in the coming weeks.
AFCA determinations have no appeals process so any challenge must go through the courts.
Sequoia managing director and chief executive officer Garry Crole reiterated in written correspondence during the Professional Planner Advice Policy Summit that the trustees that offered Shield and First Guardian funds should use operational risk reserves to remediate consumers.
“I have attempted and failed to have meetings with the minister, APRA, and other parties in regard to our ORFR submissions and to seek fairness aligned to the Corporations Act,” Crole said.
InterPrac is being sued by the corporate regulator ASIC for its role in the $1 billion collapse. Financial adviser Ferras Merhi, who was an authorised representative of InterPrac, is also being sued and is alleged to have signed 6000 Statements of Advice within a three-year period and taken millions from the funds for marketing.
InterPrac is the only solvent licensee implicated in the Shield and First Guardian collapse. Financial Services Group Australia, United Global Capital, Next Generation Advice and MWL Financial Services have all had their licenses cancelled by the regulator.
AFCA has given indefinite membership extensions of the insolvent licensees implicated in Shield and First Guardian, due to concerns that investors impacted by the $1 billion collapse may not have had a chance to lodge a complaint.
Despite there being no new date to terminate the AFCA memberships of those firms, the extension isn’t expected to be permanent.
While being the only solvent licensee – and part of the ASX-listed Sequoia Financial Group – the industry and Shield and First Guardian victims harboured concerns that the organisation would consider a phoenixing strategy which the company denied it would be pursuing last year.
These concerns arose as Sequoia previously put its Libertas licensee into voluntary administration, which saw an AFCA determination against the licensee go through to the Compensation Scheme of Last Resort.
Sequoia revealed during its half-year results that it would seek to withdraw a cross-guarantee between its subsidiary licensees that tied together its liabilities, however ASIC intervened days later forcing the group to withdraw the application.
Former ASIC Commissioner Danielle Press quit a governance committee established by Sequoia Financial Group just seven months after she was recruited to help lift governance standards at InterPrac Financial Planning.
Investments in Shield and First Guardian grew due to a sophisticated network of lead generators that contacted people who used online ‘superannuation health check’ advertisements and used high-pressure sales tactics to refer them 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.
The regulator has taken action against the “gatekeepers” who weren’t related parties to the collapse, but were otherwise responsible for alleged due diligence failures.
ASIC has come to agreements with Macquarie and Netwealth to remediate consumers back to their starting position before being rolled over into either Shield or First Guardian, but Equity Trustees and Diversa Trustees chose to instead fight the regulator in court.
Diversa was responsible for Your Choice Super, Praemium Super and Aus Prac Super platforms while Equity Trustees was responsible for NQ Super and DASH’s Super Simplifier.
Diversa and Equity Trustees contend their situation was different to that of Macquarie and Netwealth who were the branded trustee and platform.
SQM Research is also being sued for preparing reports on the funds that contained misleading representations and that its processes fell short of expected standards.
