ASIC intervenes after Sequoia offloads Interprac to shell company

The corporate regulator has stepped in after Interprac Financial Planning was secretly sold to a shell company under its nose, giving some hope to dudded First Guardian and Shield investors.

Interprac’s parent, ASX-listed Sequoia Financial, on Monday said the Australian Securities and Investments Commission was considering the financial firm’s move to revoke its deed of cross guarantee following the sale.

Crucially, this deed ties Sequoia and its subsidiaries to Interprac’s liabilities. Interprac has a massive exposure to Shield and First Guardian after its advisers directed more than 6800 retail clients to invest $680m in the two failed funds.

Sequoia offloaded Interprac a week ago, sending a notice to ASIC that it was now owned by Bellbird Australia and the deed was revoked. The regulator has now responded.

“ASIC informed Sequoia that the documents submitted to it by Sequoia and InterPrac were under consideration, had not yet been accepted for lodgement … and that all conditions to the cessation of the deed in respect of Interprac would not be met unless and until ASIC accepted the lodgement,” Sequoia told the market on Monday.

“ASIC has since asked for certain information to be provided to it by Sequoia … for the purposes of ASIC’s consideration regarding the lodgement,” the firm said.

Sale being scrutinised

The update comes after the regulator said it was closely scrutinising the sale amid fears it would leave investors worse off.

“My biggest fear is that the sale of Interprac, together with the cancellation of Sequoia’s cross guarantee, could leave investors with a much smaller pool of money to recover from,” investor advocate Melinda Kee told The Australian.

“Thousands of First Guardian and Shield victims are still waiting for AFCA outcomes, they need to know who is financially standing behind those liabilities now.

“ASIC intervened when Sequoia tried to sell Interprac earlier this year because of concerns about creditors. Investors deserve to know what has changed,” she said.

They have been fighting for over a year to get any money out of Interprac, to no avail, with the firm going as far as suing the financial complaints ombudsman, AFCA, right as claims were pouring in and determinations being made in investors’ favour.

All of this has meant delay after delay for investors who are becoming increasingly desperate as time goes by. For many, the money in Shield and First Guardian was their life savings, all now gone.

About 12,000 investors tipped $1bn of their super savings into Shield and First Guardian, two funds that have since collapsed and are under investigation for allegedly misusing investors’ money.

Investigations show Bellbird, Interprac’s new owner, was only registered as a company the day before the sale completed and its sole director and shareholder is Scott Beeton, the founder and former CEO of Sequoia.

In revoking the deed of cross guarantee, Sequoia is attempting to wash its hands of the issue by walking away from Interprac, which is also being sued over its role in the Shield and First Guardian debacle.

The regulator did scuttle an earlier attempt by Sequoia to offload the troubled advice licensee back in April.

At that time, ASIC took Sequoia to court over the proposed sale to unknown firm Conquest Investment Partners, seeking the appointment of a receiver to investigate the sale.

Shield and First Guardian investors who have lodged claims against Interprac with the financial complaints ombudsman are now left fearing they will recover nothing from the advice licensee and their claims will move straight to the Compensation Scheme of Last Resort (CSLR).

The CSLR is designed to step in and compensate investors when a firm goes into insolvency or for some other reason can’t pay out a determination.

It can pay out a maximum of $150,000 per claim but is already at breaking point and currently has no money to pay out any claims for the rest of the financial year. If Interprac claims are dumped onto the scheme, payouts are sure to take many years.

Sequoia in August said it was appointing an independent adviser to undertake the Interprac sale process but did not disclose their identity.

The firm has had recent dealings with Beeton who, as well as being Sequoia’s former CEO and now Interprac’s new owner, also owns a 20% stake in another advice licensee, AvalonFS.

Sequoia and NSW-based Avalon signed a contract earlier this year whereby Avalon paid $80,000, and in exchange, Interprac would make it easier for advisers to join the rival firm.

While the vast majority of Interprac advisers had nothing to do with Shield and First Guardian, wealth platforms last year took the view to ban new business from any adviser associated with the licensee.

About 200 have jumped ship from Interprac so far this year, with a number landing at AvalonFS.

When Beeton left Sequoia in 2019 he was succeeded by Garry Crole, who led the firm until late July this year, when he stepped down.

Weeks later, ASIC banned Crole from operating in financial services for the next decade. He remains a substantial shareholder in Sequoia.

This article first appeared in The Australian as ASIC intervenes after Sequoia offloads Interprac to shell company.

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