Sequoia agrees to court undertaking blocking InterPrac’s exit from cross-guarantee

ASX-listed Sequoia Financial Group has agreed to a court undertaking that it won’t lodge a certificate with ASIC that says the sale of InterPrac Financial Planning to Conquest Investment Partners is “bona fide, fair and reasonable”.

The undertaking follows court proceedings launched by ASIC in April that intervened in the proposed sale over concerns the new owners would avoid paying mounting liabilities of the firm.

Without that certificate, Sequoia can’t remove InterPrac from the deed of cross-guarantee.

Sequoia announced it was selling the struggling licensee to Conquest in March due to almost all major platforms blacklisting InterPrac-authorised representatives.

The regulator was concerned that the sale may remove the guarantee InterPrac’s debts upon completion of the sale to Conquest via the 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 guarantees the debts of the other entities.

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.

AFCA has already made determinations against InterPrac, but the licensee is now suing the complaints authority over concerns about its jurisdictional coverage, bringing in investor advocate Melinda Kee into the suit.

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.

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 joining due to concerns about the direction the company was heading.

Sequoia chair Mike Ryan and managing director and part-owner Garry Crole have both departed the company in the past few months.

Several other licensees have had their ASFLs 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.

ASIC announced on Friday it is taking the auditors of First Guardian to court.