)
Wealth management platform Netwealth Group (ASX: NWL) is seeking federal government assistance to help compensate more than 1,000 of its members that the company reveals are exposed to a combined $101 million from the collapse of the First Guardian Master Fund.
The figure represents net investments by members that were made before Falcon Capital, the responsible entity of First Guardian, suspended redemptions on 28 May 2024.
Netwealth says Falcon had valued the investment at $128 million when redemptions were suspended on 28 May 2024.
However, the company today says it considers the performance returns and valuations “unreliable”.
The $101 million in funds are among $1.2 billion in retirement savings collectively put at risk by the collapse of First Guardian, Shield Master Fund and Australian Fiduciaries.
Since February 2022, funds totalling more than $480 million were invested in Shield by at least 5,800 consumers who accessed the fund through various independent superannuation investment platforms, including Netwealth.
In an update to shareholders today, Netwealth says its subsidiary Netwealth Superannuation Services has submitted an application to the Minister for Financial Services, Dr Daniel Mulino, for financial assistance under Part 23 of the Superannuation Industry (Supervision) Act.
The basis of the application is that Netwealth considers that Falcon Capital engaged in “fraudulent conduct resulting in losses to the Netwealth Superannuation Master Fund”.
“Netwealth believes fraudulent conduct by other entities and individuals has also contributed to these losses,” says the company.
“While acknowledging that work by liquidators and ASIC is ongoing, Netwealth believes sufficient evidence exists to establish that losses arose from fraud and that Part 23 requirements have been met.”
Netwealth points out that due to the complexity of events leading up to the First Guardian collapse, it expects the federal minister's consideration to take “some time”.
“It is premature to provide assurances regarding timing or outcomes,” says the company, adding that any financial assistance granted may only partially compensate members for losses incurred.
In an update to shareholders earlier this month, Netwealth said it was working cooperatively with industry bodies and regulators in relation to members invested in the First Guardian funds via the Netwealth platform.
“Our position remains that the First Guardian matter is a case of fraud and that Netwealth has complied with all relevant legal obligations,” said the company at the time.
Netwealth acknowledges that ASIC is investigating a number of entities and individuals in relation to their conduct in connection with the collapse, including Netwealth.
“While Netwealth's position remains that it complied with all relevant laws in making FGMF (First Guardian) available on its platform, should a claim against Netwealth be established, the company has the resources to honour any resulting legal or monetary obligations,” says the company in its ASX announcement today.
“We are continuing to work co-operatively with all relevant stakeholders including the government, the regulators and the liquidators to pursue the best possible financial outcomes for Netwealth members, whilst also supporting members’ wellbeing as the relevant legal and regulatory processes take their course.”
)
