ASIC will rely on the courts to decide whether InterPrac should have an AFSL as it seeks to restrain the licensee from carrying on any financial services business.
In a speech to the Professional Planner Advice Policy Summit at the National Press Club of Australian in Canberra on Monday morning, ASIC Commissioner Alan Kirkland said the regulator has sought civil penalties but would also seek to restrain InterPrac from carrying on a financial services business.
The regulator is suing the licensee for its role in the $1 billion Shield and First Guardian collapse alleging it failed to conduct proper oversight of its authorised representatives.
However, in a follow-up question during the Q&A portion of the session, Kirkland was unable to disclose the specifics of why ASIC wouldn’t cancel the license as it has done with every other AFSL involved in the Shield and First Guardian Collapses.
“There is a range of paths on those matters, and we take what we think will be the most effective given what we’ve gathered through our investigations,” Kirkland said.
However, InterPrac-owner Sequoia Financial Group group chief executive Garry Crole told investors last year that the company only expects fines and licensee restraints to come out of the legal proceedings.
In addition to being sued by the regulator, Macquarie, Netwealth, CFS, AMP, BT and HUB24 have all restricted access to InterPrac’s authorised representatives on their platforms.
Padua Wealth Data reported last week that Sequoia has seen 55 advisers depart since the start of last October.
ASIC has nearly 50 staff working on 26 investigations involving numerous entities and individuals connected to Shield and First Guardian collapse, Kirkland told the summit.
The regulator’s court action has not only involved the lead generators, advisers and the two funds, but also the platform trustees that held the products and researchers.
Macquarie and Netwealth agreed to remediate consumers, but Diversa Trustees and Equity Trustees are both in court.
ASIC has since amended its court filing against Equity Trustees – which said last week it may divest its super trustee business – to seek compensation for investors.
Kirkland said ASIC currently has 12 cases underway against 21 defendants, including all four of the super trustees involved.
“These matters are among the most complex and resource-intensive in ASIC’s history,” Kirkland said.
“The work involved in building a case for enforcement action is painstaking, time-consuming and vitally important, but we are far from done and there are more cases to come.”
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 financial adviser Ferras Merhi to court over allegations he received money from the funds to help market them and received inflated loans from the fund to help purchase his businesses.
The Australian Financial Complaints Authority found that lead generators received a cut of the advice fees as well as collecting much of the client information for the advice documentation.
In another instance, AFCA found an investment manager for Shield acted a lead generator for the advisers.
ASIC has alleged Merhi was responsible for signing more than 6000 Statements of Advice within a three-year period.
“When I spoke at this event last year, I highlighted our ongoing investigation into the Shield Master Fund, which I described as being consistent with a pattern of conduct we were seeing involving other entities,” Kirkland said on Monday.
“I was limited at the time in what I could say, but what I did say was a hint about the scale of work we had underway. Hopefully, the picture is much clearer now, with the names Shield and First Guardian having gained national notoriety.”
