In recent years, ASIC has had an increasing focus on the `gatekeepers’ to the financial services industry, even listing it as one of its top enforcement priorities in 2024. Traditionally focused on the conduct of auditors and liquidators, increasing scrutiny is being placed on trustees and responsible entities (REs), with several landmark actions shaping the nature of their duties in the funds management, superannuation and financial services sectors. In this article, we explore this increasing scrutiny as a reminder of the broad scope of the duties and responsibilities of trustees and REs, as well as their liability position at law.
Need to know
ASIC is increasing its scrutiny of trustees and REs in their role as gatekeepers in the financial services industry and is pushing for higher standards.
Recent enforcement actions against Macquarie and Equity Trustees highlight that the role of platform operators is as critical as those who operate and advise on the product.
Although these cases focus on superannuation trustees, they will have far-reaching impacts for trustees and REs.
We are actively monitoring these industry changes and can help you prioritise robust governance and compliance, including comprehensive assistance with assessing, auditing and updating your existing policies.
Our HW Funds team has developed a guideline to help clients navigate their fiduciary duties, statutory obligations and practical risks that come with acting as trustee or RE. The Guideline for Trustees & Responsible Entities will be released soon, so stay tuned!
Key duties and ASIC’s perspective
Entities acting as trustees or REs have a myriad of common law, equitable and statutory duties, in addition to those contained under the trust’s governing documents. Some of the most essential duties are summarised in our article Trustee essentials: 10 duties that matter most. Two duties at the core of a trustee and RE’s role are to act in the best interests of beneficiaries and to administer the trust personally. These roles are central to ASIC’s growing focus on trustees and REs as gatekeepers to the industry.
ASIC Deputy Chair and soon to be ASIC Chair Sarah Court, has previously explained the concept of gatekeepers as including licensees and other persons or entities in a position to advise on or authorise the provision of financial or credit services. Court said these gatekeepers were in a unique position to identify and limit misconduct by those involved in the day-to-day provision of financial services.
Current ASIC Chair Joe Longo has been open in saying ASIC believes higher standards are needed for key gatekeepers, such as trustees and REs, and ASIC is looking at whether this is adequately captured by existing laws. ASIC’s strategy is designed to ensure those who are positioned to stop misconduct are held liable when they do not so do, leading not just to individual accountability, but improved consumer trust and market confidence.
Lessons from recent fund collapses
The collapse of Shield and First Guardian funds has exposed deficiencies in the processes of numerous industry participants, resulting in over 12,000 people losing an estimated $1.2 billion in superannuation. Among those presently accused of wrongdoing, there seems to be a common defence akin to ‘that wasn’t part of my role’. Many participants appeared to assume a deep dive into the products and the processes used by the investment manager were someone else’s responsibility. This lack of clarity of roles and responsibilities has seen ASIC take enforcement action against a range of people.
We have seen two `gatekeeper’ actions against superannuation trustees - Macquarie and Equity Trustees. Both Macquarie and Equity Trustees were the trustees of superannuation platforms through which people could invest in the First Guardian and Shield funds that, in ASIC’s view, established the infrastructure which allowed access to the products.
There has been somewhat of an industry misconception that placing a fund on a platform was largely an administrative task; that the initial and ongoing due diligence into the product and its flaws, or potential issues with those operating it, should take place at another level. However, this approach pays insufficient regard to the capacity in which the platform operators are acting, as trustees and AFS licence holders, and the fundamental duties which those roles attract. No doubt ASIC’s actions against Macquarie and Equity Trustees, intended to clarify the extent of platform operator’s roles and send a signal to the industry that their role in the investment pipeline is as critically important as those who operate and advise on the product.
ASIC’s claim against Equity Trustees concerns the level of due diligence it undertook before allowing the Shield Master Fund to be available for investment on its platform, as well as the amount of ongoing monitoring it undertook after its inclusion. ASIC has alleged shortcomings in reliance on external research without independent analysis or verification, as well as unclear governance and approval structures.
ASIC’s claim against Macquarie was confined to monitoring failures once it had approved the Shield Master Fund for inclusion on its platform, presumably accepting Macquarie had carried out adequate initial due diligence. They allege Macquarie did not ensure it carried out regular monitoring assessments or appropriately interrogated the assessments which were performed - effectively that it adopted a ‘set and forget’ approach once the product was listed.
In summary, ASIC alleges each trustee failed to:
- exercise the same degree of care, skill and diligence as a prudent superannuation trustee would;
- act in the best financial interests of its members; and
- do all things necessary to ensure the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly.
Macquarie has admitted to the alleged contraventions and agreed a remediation plan with ASIC which will see investors fully compensated for their losses, with no further penalty payable by Macquarie. It remains to be seen whether this will be accepted by the court, which has been increasingly scrutinising penalties agreed between ASIC and offenders in recent times.
Equity Trustees in contrast is defending the proceedings, contesting both the allegations and the compensation orders ASIC seeks. The proceedings are in their very early stages with Equity Trustees being required to file its defence on 16 March 2026.
Implications for trustees and REs
While these cases may focus on superannuation trustees, they will ultimately have broader ramifications for trustees and REs, in circumstances where ASIC is agitating for the imposition of higher standards for those entities. At a minimum, these cases should provide clarity for trustees and REs around how extensive due diligence and monitoring processes must be before they facilitate investments into a product and the circumstances where they can rely on others having fulfilled their duties.
