Here’s what the First Guardian and Shield Master Fund debacles will mean for investors

More than $1.2 billion and over 12,000 individuals were impacted by First Guardian Master Fund and the Shield Master Fund. If you were not an investor in those funds, it is easy to just shrug it off and be relieved it was not you. But even if it will never happen to you, there will likely be regulatory changes that you should be aware of.

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What happened with the First Guardian and Shield Master Funds

They were managed investment schemes that over 12,000 individuals were invested in , having switched out of regulated super funds into these schemes, often based on professional financial advice.

In May 2024, First Guardian’s responsible entity Falcon Capital suspended applications and withdrawals from the fund, and in early 2025 ASIC froze assets and took court action amid concerns about mismanagement, conflicts of interest and investments that didn’t match what was promised to investors.

Liquidators were appointed later in 2025 to wind up First Guardian and related entities. Investors have been told that recoveries are likely to be partial — potentially resulting in significant losses and long waits before any return of capital (with full distributions unlikely until at least 2027).

The Shield Master Fund was terminated in April 2025 and is also under liquidation after problems with its underlying investments and governance. Some investors through large platforms have already been fully compensated through legal settlements with intermediaries such as Macquarie.

How did it all happen?

These collapses exposed deep flaws in the oversight of how managed investment schemes are offered through superannuation platforms and raised questions about advice practices, disclosure, risk assessment and financial product governance.

ASIC’s investigations have found that many investors were advised — often via marketing lead generators and financial advisers — to switch super balances into these schemes despite significant risks that weren’t properly disclosed. Lead generation and advice fees are under scrutiny because they were linked to incentivising risky investments.

Also attributed was weak governance by trustee entities and superannuation platforms that failed to identify red flags in how these funds were marketed, valued and reviewed prior to being made available to members.

The collapse of these funds has sparked debate about the adequacy of Australia’s superannuation system when non‑prudentially regulated investment schemes become embedded in the retirement savings ecosystem.

Issues raised include fairness for members who lose savings due to mismanagement, the balance of risk transfer to individuals, and how compensation frameworks should reflect large‑scale harm.

There have even been discussions in investor communities about how this situation interacts with broader superannuation policies — such as how tax rules for large super balances apply to members who have suffered losses.

So what will change for investors?

First of all, there will be a cooling‑off period before a person’s superannuation can be switched to a new fund, particularly when large balances are involved or the destination is a less regulated investment vehicle.

A cooling‑off period would give members a short statutory window (days to weeks) in which they can reconsider or cancel that switch before it’s irreversible — a protection that currently does not exist right now.

The government also plans to limit inappropriate financial advice fees tied to such switches and strengthen anti‑hawking laws to clamp down on high‑pressure sales tactics that drove many transfers

There have been further proposals including strengthening anti-hawking rules, an expansion of the existing Compensation Scheme of Last Resort (CSLR) to grow the ability of the CSLR to pay claims from misconduct events that go beyond small-scale disputes. The CSLR was not designed to deal with a case on this magnitude.

Turning to other regulators, the Australian Prudential Regulation Authority (APRA) has responded to the collapses by signalling much tougher expectations on super trustees regarding Due diligence before offering investment options on platforms; ongoing monitoring of underlying managed funds; and operational risk frameworks and governance standards.

The Australian Securities and Investments Commission (ASIC) has likewise the aftermath of the collapses to expand regulatory enforcement actions against multiple parties, including Super trustees accused of insufficient due diligence and monitoring; financial advisers accused of unconscionable conduct, conflicted remuneration structures and breaches of best‑interest duties; and responsible entities and related parties in the collapsed funds.

Conclusion

The collapse of the First Guardian and Shield Master funds represents one of the most serious failures in Australia’s superannuation and investment governance framework in recent decades. It exposed how large volumes of retirement savings could be diverted out of prudentially regulated super funds into lightly supervised managed investment schemes through a combination of conflicted advice, aggressive marketing, weak platform oversight and gaps between ASIC and APRA regulatory regimes.

Investors should look for regulatory changes that will happen, most importantly a cooling-off period for super switching but also tighter anti-hawking laws and expanded CSLR funding.