The Australian corporate regulator is investigating the recent sale of Interprac Financial Planning amid concerns that the transaction could jeopardize investor recoveries linked to failed investment funds Shield and First Guardian.
Interprac, previously owned by Sequoia Financial—an ASX-listed company—was transferred last week to Bellbird Australia, a newly registered shell company. Sequoia also notified the Australian Securities & Investments Commission (ASIC) of its intention to revoke the deed of cross guarantee that had previously tied Sequoia and its subsidiaries to Interprac’s liabilities.
The deed of cross guarantee is significant because Interprac, through its financial advisers, had directed over 6,800 retail clients to invest approximately $680 million in Shield and First Guardian, two funds that have since collapsed and are subject to ongoing investigations regarding alleged misuse of investor funds. The revocation of this deed could effectively reduce the financial backing available to satisfy claims arising from these investments.
ASIC has yet to accept the lodgement of the deed revocation and has requested further information from Sequoia to properly assess the situation. According to a statement from Sequoia, ASIC indicated that all conditions for cessation of the deed will only be met once the regulator formally accepts the lodgement.
Investor advocates have expressed concern that this move may leave thousands of affected investors with diminished prospects of recovery. Melinda Kee, an advocate for those impacted, highlighted ongoing delays for individuals who placed their life savings into Shield and First Guardian and are still awaiting decisions from the Australian Financial Complaints Authority (AFCA).
Bellbird Australia, the new owner of Interprac, was incorporated just one day prior to the sale’s completion. Its sole director and shareholder is Scott Beeton, Sequoia’s founder and former CEO. The circumstances have raised questions about the transparency and intent behind the transaction, particularly as it appears Sequoia is attempting to distance itself from Interprac amid legal actions linked to the failed funds.
This is not the first attempt by Sequoia to offload Interprac. Earlier this year, ASIC challenged a proposed sale to Conquest Investment Partners, leading to court proceedings aimed at scrutinizing that deal.
Investors who have lodged claims with AFCA may now face uncertainty regarding their ability to recover losses through Interprac. If claims against Interprac are unsuccessful, they could default to the Compensation Scheme of Last Resort (CSLR), which provides compensation when firms are insolvent or otherwise unable to pay claims. However, CSLR is already operating at capacity and has insufficient funding to cover claims for the remainder of the financial year, potentially prolonging payouts for years.
Sequoia announced in August that it had engaged an independent adviser to oversee the sale process for Interprac, though the adviser’s identity has not been publicly disclosed. Scott Beeton, now Interprac’s owner, also holds a 20% stake in Avalon Financial Services, a competitor advice licensee based in New South Wales. Avalon entered into an agreement with Sequoia earlier this year, paying $80,000 in exchange for preferential access for advisers to join Avalon. Since then, roughly 200 advisers have left Interprac, many transferring to Avalon.