Financial Planner Accused of 'Industrial-Scale' Super Fund Failures
Australia's corporate watchdog has launched explosive legal action against financial planning firm InterPrac, alleging what it describes as 'industrial-scale misconduct' affecting nearly 7,000 investors. The Australian Securities and Investments Commission (ASIC) claims InterPrac failed to ensure its authorised representatives complied with financial laws, leading to clients investing approximately $677 million in two super funds that subsequently collapsed.
The Problematic Funds and Questionable Practices
According to Federal Court documents filed on Wednesday, ASIC stated that 'no competent financial adviser could have recommended investment in Shield or First Guardian (Master Funds).' Both funds allegedly featured exorbitant fees, opaque investment strategies, and funneled millions of dollars to Venture Egg and its director, Ferras Merhi, who previously served as one of InterPrac's authorised representatives.
The court documents reveal that Mr Merhi informed InterPrac in June 2024 that companies under his control had received nearly $20 million from the two funds. Despite this disclosure, ASIC alleges InterPrac permitted Venture Egg and Merhi to continue operating as authorised representatives until 31 May 2025.
InterPrac stands accused of relying exclusively on external research when approving Shield and First Guardian for its advisers. Even when the company implemented a temporary hold on new investments into these funds, it allegedly failed to maintain the restriction.
Concerning Consent Methods and Wider Fallout
Perhaps most troubling for affected investors is the revelation that InterPrac allowed Venture Egg to use 'negative consent' practices when altering client portfolios. This controversial method enables financial advisers to adjust client investments by issuing a statement indicating the client consents unless they explicitly object.
The collapse of Shield and First Guardian represents one of ASIC's most complex ongoing cases, with the regulator confirming that more than 40 investigators are working full-time to pursue justice for those responsible for investor losses.
ASIC deputy chair Sarah Court emphasised the scale of the alleged misconduct on Wednesday, stating: 'What we are talking about here is an industrial-scale misconduct that involved a range of players. We are very methodically working through them in order to make sure... we hold those companies and individuals involved to account.'
The regulator has also initiated separate legal proceedings against fellow advice licensee MWL and research house SQM for their alleged roles in misleading customers. Additionally, ASIC has launched a distinct case against Mr Merhi, accusing him of unconscionable conduct and failing to act in clients' best interests while receiving millions of dollars.
Investors who placed money into Shield or First Guardian should contact the respective liquidators for updates on potential investment recovery and may be entitled to lodge formal complaints with the Australian Financial Complaints Authority. The case against InterPrac will return to the Federal Court at a later date.
