Government Urges Industry to Address Shield and First Guardian Fallout
Government Urges Industry to Address Shield and First Guardian Fallout
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The Australian government, led by Minister for Financial Services Daniel Mulino, is advocating for industry and regulatory engagement to address the ramifications of the $1.2 billion collapse of Shield and First Guardian funds.
Although government intervention may be necessary, the immediate focus is on ensuring consumer protection amid the fallout, which has prompted investigations by the Australian Securities and Investments Commission (ASIC) into fund managers, advisors, and associated entities.
In response to the collapse, Macquarie has reached an agreement with ASIC to purchase the holdings of Shield investors on its platform. This initiative aims to bring clients back to their original position before they switched to the failing fund. The cost for Macquarie stands at $321 million, which they aim to partially recover from the liquidators.
Addressing the PritchittBland Communications event in Melbourne, Mulino highlighted the necessity of immediate regulatory action to protect consumer interests. He instructed his department to explore policy options, acknowledging the need to consider investor choice while implementing safeguards, echoing sentiments shared by ASIC chair Joe Longo.
With the backdrop of previous financial reforms, such as the Future of Financial Advice Reforms and insights from the Hayne Royal Commission, Mulino posits broader policy measures to ensure adequate retail investor protections. Potential measures include slowing down the process involved in large transactions to safeguard against rapid fund switches.
The ASIC's suspension of fund flows arose over concerns about mismanagement, including extravagant personal spending and investments in risky ventures tied to directors. In addition, over 140 advisors are under scrutiny for their roles in promoting these funds via aggressive marketing tactics that exploited legal gaps.
Mulino has also communicated with regulators like APRA and ASIC to address the onboarding of products and the capitalisation levels of managed investment schemes. APRA's thematic review of platforms aims to elevate industry standards, coinciding with the Financial Services Council’s (FSC) recent steps towards establishing best practice principles for superannuation platform trustees.
Major platforms and fund managers, including Macquarie, Equity Trustees, and Netwealth, are collaborating under the aegis of the FSC to chart a forward path for the industry.
On future developments, Mulino acknowledged the ongoing Treasury review of the Compensation Scheme of Last Resort initiated by his predecessor. Although the exact mechanics of the scheme are still under consideration, Mulino emphasised minimising the negative impacts on affected individuals and affirmed the scheme's role as a crucial safety net for investors.
Published:Friday, 17th Oct 2025 Source: Paige Estritori
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