Sequoia ‘assisting’ ASIC’s Venture Egg investigation

Sequoia managing director Garry Crole told ifa that the group’s subsidiary, Interprac Financial Planning, is working with ASIC as it investigates financial adviser Ferras Merhi and Venture Egg Financial Services.

In February, the Federal Court made interim orders freezing certain assets of Merhi in connection with its investigations concerning certain managed investment schemes, including Shield Master Trust and First Guardian Master Fund.

Merhi controls Venture Egg, and both he and Venture Egg are authorised representatives of Interprac Financial Planning. He also controls Financial Services Group Australia, which holds an AFSL.

The next hearing related to Merhi is currently scheduled for 26 May 2025.

In an ASX release, Sequoia acknowledged that “ASIC has commenced an investigation into suspected contraventions of the Corporations Act & ASIC Act 2001 by Interprac and/or its representatives”.

According to the firm, Interprac is assisting the regulator to ensure that the “interim freezing orders have not been, and are not, breached by Mr Merhi and/or other of his associated entities”.

It is also reviewing the “obligations of the rating authorities with respect of the Funds” and its obligations related to the “advice provided compared to the performance of, and conduct engaged by, the funds”.

Sequoia added that it would consider the obligations of trustees, auditors and custodians of the funds, the obligations of platform providers through which the investments into the funds were made, and review its operations and systems.

While Crole told ifa that he could not “provide any additional information at this point in time”, he noted that the Shield and First Guardian situation was “an extremely complex matter”.

“Deloitte is undertaking a detailed process to manage the funds in the best interests of members who hold superannuation balances with various platforms that offered them as investment choices,” he said.

“Interprac is assisting ASIC with their investigation into the matter which is highly complex, involving the roles and responsibilities of the trustees, auditors, custodians, and platform providers and do confirm Interprac as AFSL had no conflict in regards to recommendations made by its advisers into the Macquarie, Equity Trustees and Netwealth platforms where these underlying funds were offered.”

According to comments Merhi has made previously, Venture Egg has about 5,000 clients with $250 million in Shield and 3,600 clients with $192 million invested in First Guardian, putting the total exposure for clients in excess of $440 million.

ASIC's 'most complex' investigations

In his opening address to Senate estimates in February, ASIC chair Joe Longo said the “investigations around the Shield Master Fund are among the most complex that ASIC is undertaking at the moment”.

“I think they’re very serious for all Australians,” the chair said following questions from Senator Barbara Pocock.

“The amount of money involved, ordinary Australians being talked into doing things that really ought not to have occurred. There really is misconduct.”

In February 2024, ASIC halted new offers of investments in Shield Master Fund and made interim stop orders on four product disclosure statements for Shield.

In June 2024, ASIC took action to secure the assets held within Shield. ASIC sought the appointment of Jason Tracy and Lucica Palaghia of Deloitte as receivers and managers of the property of Keystone Asset Management (KAM).

In December 2024, ASIC noted that the creditors of Keystone had resolved to wind up KAM and appoint Jason Tracy and Glen Kanevsky of Deloitte as joint and several liquidators.

“The investigation to date suggests that potential investors were called by lead generators and referred to personal financial advice providers who advised investors to roll their superannuation assets into a retail choice superannuation fund and then to invest part or all of their superannuation into Shield,” the regulator said in December.

As a result of this, ASIC said its investigation of the circumstances surrounding Shield includes KAM and its directors and officers, the role of the superannuation trustees, the financial advisers who recommended investors invest in Shield, the lead generators, and others.

“It has come to ASIC’s attention that Venture Egg (a financial adviser who has advised clients to invest in Shield) has issued letters to investors dated 29 November 2024 and 2 December 2024,” ASIC added at the time.

“ASIC is concerned that the information in the letters is incomplete and some of the statements in the letters are inaccurate.”

In October, ASIC cancelled the AFSL of Queensland-based Next Generation Advice, which is in liquidation and had recommended investments that included the Global Capital Property Fund and the Shield Master Fund.