Shadow Minister for Financial Services Pat Conaghan has accused the Albanese Government of dragging its feet on regulatory reform for managed investment schemes (MIS) and said that if it had moved faster, the devastating financial losses seen in the collapse of Shield and First Guardian master funds might have been avoided.
“Billions of dollars of everyday Australians’ retirement savings are now at risk, lost in the collapse of dodgy schemes like First Guardian and Shield, all of them so-called managed investment schemes,” Conaghan said during Question Time on Wednesday.
“Thousands of Australians are facing devastating losses and in too many cases they’ve lost their entire retirement nest egg. And what’s the government’s response? Nothing but silence.”
Conaghan said that there has been “no report and no explanation” since the end of the consultation for the government’s review of the regulatory framework for managed investment schemes, which closed in September 2023 but for which no findings have been released.
“What were the recommendations?” Conaghan said.
“Could implementing those recommendations have protected these investors? Could they have protected hard-working Australians who have done the right thing and now have lost everything? We simply don’t know because this government has bizarrely buried its own report.”
The review was introduced via the 2022 Federal budget in October after Labor came into power and came as the new government backtracked on its pledge to include MISs in the Compensation Scheme of Last Resort, leaving advisers responsible for covering last resort remediation.
The MIS review would examine the rules around managed investment schemes, including the threshold for how a sophisticated and wholesale investors are defined.
Prior to the introduction of the MIS review, the rules that governed them “hadn’t been looked at in over 20 years”, according to then minister for financial services Stephen Jones, who called out the high-profile collapses of Trio Capital, Timbercorp and Stirling Income Trust.
“We know investments carry varying degrees of risk and we need to get the balance right to make sure we have incentives but also appropriate consumer protections in place,” Jones said in February 2024, the last update on the review where he announced no decision had been on the review despite media conjecture at the time.
“We thought that after 20 years, it was worth having a look at the framework to make sure it still fit for purpose in 2024 and into the future.”
The review was also launched concurrently with a Parliamentary Joint Committee review in the wholesale investor test which had an overlapping terms of reference.
But more than a year later, the MIS review continues to languish – and Conaghan said that investors and consumers deserve “transparency and answers”.
“I’m calling on the Treasurer to release the review, put the facts on the table and address this issue directly for the Australians caught up in this scheme. The government should be providing answers to everyday Australians, but, once again, Labor are asleep at the wheel.”
But Conaghan’s drive-by is awkwardly timed, with the Liberal-chaired Standing Committee on Economics last week axing its inquiry into the collapse of Dixon Advisory. The Financial Advice Association Australia criticised the move, with chief executive Sarah Abood saying that Shield and First Guardian demonstrated that the issues the inquiry was set to investigate were not resolved or an “isolated case”.
“It betrays the victims, and all consumers, who have put their faith in the government to fully investigate these collapses so we can understand how they happened, and what can be done to prevent them in the future,” Abood said in a statement.
“We call on all members of parliament to support the reinstatement of this critical inquiry, with an extended remit to include the collapse of Shield and First Guardian. We owe it to the victims not to walk away from this.”
