ASIC Sues Equity Trustees Over Due Diligence Failures Tied to Shield Master Fund

Key Takeaways

• Civil Penalty Proceedings: ASIC has filed a Federal Court case against Equity Trustees over alleged due diligence failures relating to the Shield Master Fund.
• $160 million (USD $108.8 million) at Risk: The trustee oversaw the investment of members’ retirement savings into Shield across 2023 and 2024.
• Breach of Obligations: ASIC alleges failures to act in members’ best financial interests and to provide services efficiently, honestly, and fairly.
• First of its Kind: This is the first action against a superannuation trustee in ASIC’s broader investigation into Shield, with more cases expected.
• Broader Exposure: Since 2022, more than $480 million (USD $326.4 million) has been invested in Shield by at least 5,800 consumers, often directed via advisers and lead generators.

Deep Dive

Australia’s corporate watchdog has launched civil penalty proceedings against Equity Trustees Superannuation Limited, alleging the trustee failed in its gatekeeping role when overseeing investments in the Shield Master Fund.

In proceedings filed in the Federal Court, the Australian Securities and Investments Commission (ASIC) claims that Equity Trustees allowed around $160 million (USD $108.8 million) in retirement savings to be funneled into Shield over 2023 and 2024 without conducting proper due diligence, leaving thousands of members with eroded balances.

ASIC Deputy Chair Sarah Court said the case is part of the regulator’s broader crackdown on superannuation trustee responsibilities.

“Instead of acting as an effective gatekeeper for its members’ retirement savings, ASIC alleges Equity Trustees allowed thousands of members to invest in Shield which had no track record. Those members ultimately saw their super balances eroded,” Court said.

“Superannuation trustees play a critical role helping people save for their retirement. We expect them to do so with care and skill and put the interests of their members first. This action should send a clear message to superannuation trustees: proper due diligence is needed when offering investment options for members.”

Allegations Against Equity Trustees

ASIC alleges Equity Trustees breached its obligations by failing:

• To exercise the degree of care, skill and diligence expected of a prudent superannuation trustee,
• To act in the best financial interests of members, and
• To ensure financial services covered by its licence were provided efficiently, honestly and fairly.

The regulator is seeking declarations and civil penalties.

This marks the first action against a superannuation trustee arising from what ASIC described as a “complex set of investigations,” with more cases expected.

“Our first priority has been preserving assets for the benefit of investors, but the next phase will be holding key players to account,” Court added.

Shield and Its Wider Fallout

Equity Trustees, a subsidiary of ASX-listed EQT Holdings Limited, manages approximately $88 billion in funds and around 800,000 members across 14 APRA-registered superannuation funds.

It approved four classes of Shield as investment options on the NQ Super and Super Simplifier platforms. Since February 2022, more than $480 million (USD $326.4 million) has flowed into Shield from at least 5,800 consumers, many of whom were directed through lead generators and financial advisers to roll their super into retail platforms before investing.

ASIC first intervened in February 2024 with interim stop orders on Shield’s product disclosure statements, and in June 2024 took steps to secure assets held within Shield to preserve value for investors.

The regulator is continuing to investigate Shield’s responsible entity, Keystone Asset Management Ltd (now in liquidation), its directors and officers, the role of trustees including Equity Trustees, financial advisers who promoted the scheme, lead generators, and a research house.

ASIC also confirmed it has a separate ongoing investigation into Equity Trustees regarding the onboarding and monitoring of the First Guardian Master Fund.

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