Netwealth wins court ruling over First Guardian dispute

An Australian Federal Court ruled that Netwealth violated financial services laws by including the First Guardian Master Fund as an investment option for superannuation members.

Court finds Netwealth breached legal obligations

The judgment, issued on 20 August by Justice McEvoy, confirmed that Netwealth Superannuation Services and Netwealth Investments Limited did not act efficiently, honestly, or fairly when offering the fund. The court determined the company failed to gather or assess adequate information about First Guardian before making its Diversified Class and Growth Class options available.

Netwealth had already admitted to the failures in December, agreeing to a $101 million compensation package for affected members. The ruling formalized that admission, stating the company did not conduct sufficient independent inquiries to evaluate the fund’s investment risks. It also neglected to warn members about potential illiquidity issues in the products.

ASIC chair Sarah Court stated the case demonstrated the responsibility of superannuation trustees to perform thorough due diligence. “Trustees must take proactive steps to identify and respond to investment risks before members face harm,” she said. Over 1,000 members suffered losses before Netwealth provided compensation.

Netwealth responds to fallout

Netwealth CEO Matt Heine said the court’s confirmation of the settlement allows the business to move forward. “The compensation payments ensured affected members’ superannuation accounts had the capital invested in First Guardian returned, reducing distress caused by the collapse,” he said in an ASX statement.

As part of its response, Netwealth Superannuation Services agreed to an enforceable undertaking with APRA. An independent expert will oversee the changes.

The court’s decision concludes the legal case, but the industry may see wider effects. Trustees now face clearer expectations: due diligence is essential to protecting retirement savings rather than exposing them to unnecessary risk.

The compensation was paid in January, separate from the court-ordered payment of ASIC’s legal costs. Those costs will be covered as agreed or determined through taxation if no settlement is reached.

Netwealth’s share price showed little change after the ruling, indicating investors had already accounted for the financial and reputational consequences.

The case highlights the need for stricter oversight in financial planning sectors, where regulatory gaps can lead to significant member losses.