The corporate regulator is closing in on individuals behind the Shield and First Guardian collapses, with criminal charges now firmly on the table — a development that should sharpen the focus of every insurer and broker exposed to the financial advice, trustee and managed investment scheme sectors.
According to The Australian, incoming ASIC chair Sarah Court (pictured) has signalled the regulator will "exhaust all possibilities" to hold individuals to account over the twin fund failures that have stripped roughly $1bn from the superannuation balances of just under 12,000 Australians. Court, who steps into the top job on June 1, told the masthead that while any criminal charges would ultimately be a matter for the Director of Public Prosecutions, ASIC is "investigating all potential outcomes, civil and criminal alike."
For the insurance market, the numbers help tell some of the cost pressure implications. The Australian reports ASIC has 26 open investigations across the two schemes, which took in around $1 billion between 2021 and 2024. Shield investors are tipped to recover 60 cents in the dollar. First Guardian investors face a far bleaker outcome — the most recent liquidator's report cited by The Australian shows just $4 million recovered, most of which has already been consumed by liquidator and legal fees.
The litigation footprint is what makes this matter genuinely significant for professional indemnity underwriters. The Australian reports ASIC has sued advice licensee InterPrac Financial Planning, research house SQM Research, and all four platform trustees that hosted the funds: Macquarie, Netwealth, Equity Trustees and Diversa. Macquarie has already repaid Shield investors $321m and Netwealth has returned $100m to First Guardian investors, while Equity Trustees and Diversa maintain they did nothing wrong.
Equity Trustees was sued last Thursday over alleged due diligence failures that The Australian reports allowed $65m to flow into First Guardian via its platforms. The trustee intends to defend the claim, telling the market it views First Guardian as "primarily a case of alleged and widespread fraud, and that the focus should be on those parties."
That defence line — fraud committed by others — is one PI insurers will hear repeatedly as claims work through the system. The breadth of named parties means coverage disputes are likely across advice, research, trustee and directors' and officers' towers simultaneously, with subrogation and contribution fights almost inevitable.
ASIC has already frozen the assets of both funds and of several individuals, including former First Guardian executives David Anderson and Simon Selimaj, The Australian reports. All parties involved, including fund directors, have denied wrongdoing. Court told the publication ASIC has more than 50 people working on the matter and described it as "an unprecedented approach from ASIC to hold a very broad, complicated web of individuals to account."
For brokers placing cover for financial advisers, the unresolved question is the role of lead generators and high-pressure super-switching tactics. The Australian notes the Financial Advice Association Australia first flagged concerns to ASIC about one of the call centres linked to the failed funds back in 2021. ASIC began investigating Shield in 2023 and imposed stop orders in February 2024, but didn't formally open a probe into Falcon Capital and First Guardian until September 2024 — seven months later. First Guardian froze redemptions in May 2024, locking investors out of their super.
Court pushed back on suggestions ASIC moved too slowly, telling The Australian: "I'm not sure we could have or should have acted earlier based on what we had at the time." She added the regulator intervened on Shield "much earlier and more proactively than we would have done in the past."
Expect three things to sharpen over the next 12 months. First, PI renewal terms for advice licensees with any exposure to managed investment schemes sourced via lead generators will tighten further, with insurers asking pointed questions about referral arrangements and product research reliance. Second, trustee liability — historically a quieter corner of the financial lines market — is now firmly in the spotlight, and the Equity Trustees defence will be a test case for how far "third-party fraud" arguments carry. Third, with Court flagging more action against individuals, D&O notifications across the advice and funds management space are likely to climb before they level off.
Brokers will want to revisit notification provisions with clients now, rather than wait for the next round of ASIC announcements.
