The Australian Securities and Investments Commission (ASIC) has moved to broaden legal action arising from the collapse of two investment funds, which cost Australians more than A$500 million of their retirement savings.
ASIC sought leave from the Federal Court to expand its proceeding against former financial adviser Ferras Merhi, whose businesses allegedly advised clients to invest in the First Guardian Master Fund and Shield Master Fund.
Merhi allegedly engaged in unconscionable conduct, failed to act in the client’s best interests, gave conflicted advice and provided defective statements of advice whilst receiving millions of dollars by using marketing companies to push clients to his businesses Venture Egg and Financial Services Group Australia (FSGA) (in liquidation).
“This type of conduct doesn’t just undermine the integrity of the financial advice and superannuation industries, it can have a devastating impact on people’s lives,” ASIC Deputy Chair Sarah Court said in a media release.
Between 2020 and 2024, Merhi and his advisers allegedly recommended advised clients to invest around $296 million of their superannuation into the First Guardian Master Fund and around $230 million into the Shield Master Fund.
These funds were marketed as diversified fixed income products through super platforms, but they were largely illiquid with overstated assets, according to law firm Slater & Gordon, which says on its website it is investigating a potential claim on behalf of investors.
The trustees for the platforms were Macquarie Group (ASX: MQG) business Macquarie Investment Management Limited and Equity Trustees (ASX: EQT).
The action comes days after ASIC launched civil penalty proceedings in the Federal Court against Equity Trustees, alleging due diligence failures concerning the Shield fund.
ASIC Deputy Chair Sarah Court said ASIC was taking action against Equity Trustees as part of its ongoing work to protect members’ savings.
“Instead of acting as an effective gatekeeper for its members’ retirement savings, ASIC alleges Equity Trustees allowed thousands of members invest to in Shield which had no track record,” the Court said in another media release.
Investors were typically called by lead generators and referred to financial advisers who recommended they roll their super into a retail superannuation fund available on a platform, and then to invest part or all of their superannuation into Shield.
ASIC has also taken action to freeze assets and restrain the travel of Mehri and other people associated with its Shield and First Guardian investigations.
