ASIC has commenced Federal Court proceedings seeking the appointment of a receiver to investigate a proposed sale of InterPrac Financial Planning over concerns the new owners would avoid paying mounting liabilities of the firm.
ASX-listed Sequoia Financial Group announced it was selling the struggling licensee to Conquest Investment Partners due to almost all major platforms blacklisting InterPrac authorised representatives.
Conquest, InterPrac, Sequoia Financial Group and another licensee owned by the company Sequoia Wealth are the four parties named in the suit.
If appointed by the court, the receiver will investigate and report on whether the sale of InterPrac’s shares by Sequoia Wealth to Conquest is “bona fide, fair and reasonable”, and report on InterPrac’s financial position and its solvency.
ASIC commenced the proceedings over concerns the sale would adversely affect the interests of creditors, including liabilities from AFCA complaints in the aftermath of the Shield and First Guardian collapse.
The regulator is concerned that the sale may remove the guarantee InterPrac’s debts upon completion of the sale to Conquest via a cross-guarantee the company previously tried to unwind.
Sequoia Financial, Sequoia Wealth and InterPrac entered into a deed of cross guarantee on 25 May 2022 where each entity is guarantees the debts of the other entities.
There are approximately 911 open AFCA complaints against InterPrac in relation to advice provided by its representatives to invest in the collapsed Shield and First Guardian Master Funds.
ASIC has already taken InterPrac to court over allegations it failed in its oversight responsibilities of advisers involved in distributing the Shield and First Guardian master funds.
ASIC has alleged InterPrac authorised representative Ferras Merhi signed 6000 Statements of Advice within a three-year period and used marketing companies to push potential clients to his financial advice businesses while receiving nearly $18 million in upfront advice fees and $19 million from entities associated with the funds to market them.
ASIC alleged InterPrac began to receive complaints from clients around September 2024 but instead of investigating the complaints it provided a template response that asserted the relevant advice had been appropriate.
The regulator will argue in court that InterPrac had the ability to monitor revenue generated by the authorised representatives and the specific products in which funds of their clients were invested.
The Federal Court ordered that Venture Egg and United Financial Advice, both firms run by Merhi, be wound up last week.
But Sequoia managing director Garry Crole has been critical of other parts of the advice chain – namely the platform trustees – and has called on them to remediate consumers.
Macquarie and Netwealth have both remediated Shield and First Guardian clients, respectively, to their initial capital position. However, Equity Trustees and Diversa Trustees are fighting allegations of due diligence failures in court.
Former ASIC Commissioner Danielle Press was recruited to help lift governance standards at InterPrac, but quit just seven months after she joining due to concerns about the direction the company was heading.
Crole has also criticised AFCA, which is unable to hear or determine complaints against all parties involved in product failures such as Shield and First Guardian, and InterPrac is now suing the complaints authority over concerns about its jurisdictional coverage.
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 applied 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 directors and personal expenses, and court proceedings against both funds are ongoing.
Several other licensees have been cancelled for their involvement of distribution of the funds and InterPrac is currently the only solvent licensee implicated in the collapse of Shield and First Guardian.
