Sequoia Financial Group has scrapped the controversial sale of InterPrac Financial Planning to Conquest Investment Partners.
The company told the ASX on Friday morning that the termination of the deal followed the inability of the parties to satisfy all conditions and requirements necessary to achieve completion of the transaction within the required timeframe.
“In particular, developments subsequent to signing have resulted in circumstances where completion cannot occur on terms consistent with those originally contemplated by the parties,” the announcement said.
“Having regard to the expected cost, complexity and uncertainty associated with progressing the transaction under these revised circumstances, the company determined that it is not in the best interests of shareholders to proceed.”
However, Sequoia will continue to “assess strategic options” for InterPrac.
A spokesperson for Sequoia declined to comment on any specifics beyond what was included in the ASX release, including what conditions the parties failed to meet and whether the abandoned sale would affect plans for InterPrac advisers to transition to the Avalon FS licensee.
Sequoia had sought to offload its struggling licensee subsidiary due to a combination of mounting liabilities and platform blacklists against its advisers that made the business commercially unviable.
The buyer was named as the little-known entity Conquest Investment Partners, which would purchase the licensee for $50,000.
The only information available about Conquest was that it was registered in July 2024, around the same time Sequoia confirmed that notice of the failure of the Shield and First Guardian funds was given to its PI insurer.
InterPrac was expected to retain approximately $1.5 million in cash reserves and an investment portfolio with around $6 million ($7.5 million in assets in total), plus $20 million in professional indemnity insurance coverage as part of the transaction.
However, Shield and First Guardian investors, the regulator and the profession raised concerns that the sale was an attempt to avoid paying remediation to investors.
ASIC has alleged in court that InterPrac-authorised advisers invested around $677 million on behalf of 6843 clients into the Shield and First Guardian funds.
The regulator launched court proceedings seeking the appointment of a receiver to investigate the proposed sale due to concerns the new owners would avoid paying mounting liabilities of the firm.
Sequoia also sought to end a cross-guarantee between its subsidiary licensees earlier in the year, but the corporate regulator intervened.
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.
InterPrac is suing the AFCA over concerns about its jurisdictional coverage which is unable to apportion blame to managed investment schemes.
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.
Merhi has disputed any wrongdoing and told Professional Planner last month that he expects the courts will find in favour of any adviser who fights the regulator’s claims that they failed to meet client best interests.
“They’re so powerful in the way they have funding to just wear people down and put them in a position where they can’t fight, but I can tell you now if advisers actually fought this, which I’m trying to do, there’d be a different outcome,” Merhi said.
“If a judge got to hear how I went about things, you would find there were no breaches in the law. I’ve been maintaining that from the get-go.”
Rhys Reilly, one of the other InterPrac advisers named in court filings, was given a 10-year ban by the regulator last month.
Several other licensees have been cancelled for their involvement in the distribution of the funds and InterPrac is currently the only solvent licensee implicated in the collapse of Shield and First Guardian.
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.
The regulator has also taken action against SQM Research and the four trustees involved in hosting the funds.
Platform trustees Macquarie and Netwealth have remediated investors to their starting investment position but Equity Trustees and Diversa Trustees are fighting allegations of wrongdoing and due diligence failures in court.
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