Netwealth Faces $101 Million Exposure in First Guardian Fund Collapse
Netwealth has lodged a formal application for government financial assistance following a $101 million exposure linked to alleged fraud in the First Guardian Master Fund, impacting over a thousand members.
- Netwealth's subsidiary files Part 23 application for financial aid
- 1,088 members affected with $101 million exposure
- Fraudulent conduct alleged against Falcon Capital Limited and others
- ASIC investigating multiple parties including Netwealth
- Outcome and timing of assistance remain uncertain
Background to the Collapse
Netwealth Group Limited has revealed a significant blow to its superannuation platform following the collapse of the First Guardian Master Fund (FGMF). The fund, managed by Falcon Capital Limited, suspended redemptions in May 2024 amid concerns over its valuations and performance. Netwealth’s exposure, representing member investments less redemptions, stands at approximately $101 million, affecting 1,088 members.
The Part 23 Application
In a decisive move, Netwealth’s subsidiary, Netwealth Superannuation Services Pty Ltd, lodged an application under Part 23 of the Superannuation Industry (Supervision) Act 1993. This legal provision allows for government financial assistance to superannuation funds that suffer losses due to fraudulent conduct, provided certain criteria are met. Netwealth alleges that Falcon Capital Limited engaged in fraudulent activities that substantially diminished the fund’s value, and that other parties may also be implicated.
Member Impact and Compensation
The application aims to restore members to their financial position prior to the fraud, with any assistance granted directed towards compensating those affected. While the fund’s value was recorded at around $128 million before redemptions were halted, Netwealth questions the reliability of those valuations. The company stresses that the process to secure financial assistance is complex and may take considerable time, with no guarantees on the extent of compensation.
Regulatory and Legal Landscape
ASIC is actively investigating the conduct of Falcon Capital Limited, other entities, and individuals connected to the fund’s collapse, including Netwealth itself. Despite these investigations, Netwealth maintains that it complied with all relevant laws in offering the FGMF on its platform. The company also confirms it has the financial capacity to meet any legal or monetary obligations that might arise from these inquiries.
Looking Ahead
Netwealth is cooperating fully with regulators, liquidators, and government bodies to pursue the best possible outcomes for its members. The company is also focused on supporting member wellbeing as the legal and regulatory processes unfold. However, the uncertainty surrounding the timing and scope of any financial assistance means members and investors will need to watch closely as the situation develops.
Bottom Line?
Netwealth’s path to recovery hinges on government support and regulatory outcomes, with member compensation still uncertain.
Questions in the middle?
- How long will the Minister’s review of the Part 23 application take?
- What evidence underpins Netwealth’s fraud allegations against Falcon Capital and others?
- Could legal claims against Netwealth materially affect its financial position?
