Federal Court confirms Netwealth's First Guardian failures

The Federal Court has declared Netwealth Superannuation Services and Netwealth Investments contravened the Corporations Act in relation to the First Guardian Master Fund.

ASIC commenced proceedings against Netwealth after accepting a court enforceable undertaking requiring it to compensate affected members 100% of the amounts they invested in First Guardian, less any amounts withdrawn.

More than $100 million was paid to over 1000 affected investors in January, after Netwealth confirmed it would compensate victims in December 2025.

ASIC did not seek a pecuniary penalty in the matter, owing to the circumstances of the case, including the timely payment of compensation to affected members, the regulator said.

Based on documents supplied by the parties, Justice McEvoy declared that Netwealth "failed to obtain and assess sufficient information about First Guardian,"

The judge also noted Netwealth failed to make sufficient independent enquiries to understand the risk of the managed investment scheme and did not inform members of the potential illiquidity of it.

ASIC chair Sarah Court said the case represents the important role platform trustees play and shouldn't be overlooked.

It also follows APRA commencing to uplift platform trustees' investment governance under a new consultation as part of minster for financial services Daniel Mulino's reform package unveiled this week.

"Superannuation trustees are a critical safeguard for Australians' retirement savings and must undertake rigorous due diligence before making investment options available to members," Court said.

"In this case, Netwealth admitted it failed to obtain sufficient information about First Guardian and failed to undertake sufficient enquiries to properly understand the risks associated with First Guardian.

"[The] outcome sends a clear message that superannuation trustees must put members first and take proactive steps to identify and respond to investment risks before members suffer harm."

ASIC has 14 cases underway against 31 defendants and is investigating alleged misconduct relating to the Shield and First Guardian Master Funds.

The First Guardian Diversified Class and Growth Class were made available to adviser-led members through Netwealth's Super Accelerator Plus product from March 2021, ASIC noted and were closed to new investments in December 2022.

Between March 2021 and December 2022, approximately $128.5 million was invested across the two First Guardian classes by 1303 members of the Netwealth Superannuation Master Fund.