Background
ASIC sued Netwealth Investments Limited (NIL) and Netwealth Superannuation Services Pty Ltd (NSS), the successive trustees of the Netwealth Superannuation Master Fund. The fund’s Super Accelerator Plus product offered members investment options through the Netwealth Platform, including the First Guardian Diversified Strategies and Growth Strategies classes.
NIL approved those options in March 2021 and NSS continued to offer them after becoming trustee in July 2021. Both companies admitted they did not obtain or assess sufficient information, or make adequate independent inquiries, to understand and evaluate the investment risks. Despite known potential illiquidity, members could invest virtually all of their account balances; 1,303 members invested about $128.5 million. The options were removed in December 2022, and withdrawals from the First Guardian Master Fund were later frozen.
The Court’s Holding
McEvoy J accepted the parties’ agreed facts and admissions and declared that NIL and NSS contravened ss 912A(1)(a) and 912A(5A) of the Corporations Act 2001 (Cth). They failed to do all things necessary to ensure that licensed financial services were provided efficiently, honestly and fairly.
The failures included inadequate due diligence and monitoring, not informing members of potential illiquidity before 6 December 2022, and, in NSS’s case, not notifying affected members after the options’ removal of concerns about First Guardian’s governance and redemption delays. The Court ordered the defendants to pay ASIC’s costs. ASIC sought no pecuniary penalty, having regard to the compensation scheme, cooperation and prompt return of members’ capital.
Key Takeaways
- A superannuation trustee must independently obtain and assess enough information to evaluate risks in platform investment options.
- The efficiently, honestly and fairly obligation is a statutory standard and is not dependent on proving breach of another legal duty.
- Netwealth’s compensation scheme paid 1,080 affected investors an aggregate $100.7 million, representing 100% of their net capital amounts.
Why It Matters
The decision underscores that trustees of choice superannuation platforms retain responsibility for due diligence, risk assessment and member communications, including where elements of the service are delegated or outsourced.
It also illustrates ASIC’s willingness to resolve admitted trustee failures through declarations and remediation rather than a civil penalty where compensation has been promptly delivered and the parties cooperate.