Managed investment schemes in government sights with new legislation

In the wake of the Shield and First Guardian collapses, the government is seeking to bring greater oversight to the governance of managed investment schemes, including expanding ASIC’s powers.

On Tuesday morning, Financial Services Minister Daniel Mulino announced the consultation, with a range of other consultations aimed at improving consumer protections following the Shield and First Guardian scandal set to be released in the coming weeks.

“Thousands of Australians lost their superannuation savings in the collapses and there needs to be change to prevent this happening in the future,” Mulino said.

“High-profile collapses erode confidence, making Australians understandably nervous about investing and reducing participation in legitimate, well-regulated products.

“When managed investment schemes are run without adequate governance or transparency, capital is not being channelled into real economic activity but instead becomes trapped in vehicles that deliver no productive return.”

Managed investment schemes in Australia comprise a total of around $3 trillion in assets, with 405 responsible entities operating a total of 3,587 registered schemes at the end of June 2025.

According to the consultation paper: “Poor conduct by the responsible entities of a subset of MISs has contributed to consumers suffering losses.

“All investments carry some risks, including normal market risks. However, the cases of Shield, First Guardian and other MIS collapses have been characterised by financial misconduct, substantial governance shortcomings and conflicts of interest, rather than merely bad investment choices.”

Part of the proposed response in the consultation paper is to prohibit responsible entities of registered MISs from conducting related party transactions outside of a few limited exceptions.

“The Shield and First Guardian matters involved loans to and investments in related parties. Reporting by liquidators indicates that many of the transactions in the Shield and First Guardian matters were not genuine, arms-length commercial transactions,” the paper added.

“The directors of the responsible entities (Keystone and Falcon) were also directors or key personnel at the investment managers responsible for the investment of the assets of the schemes and some of the entities into which investments were made.”

Regulator oversight

According to Minister Mulino, it is preferable that “investment flows efficiently into activities that support innovation, business growth and long-term economic development” in order to create a more resilient, productive economy.

However, the government also needs to ensure that investor interests are protected.

“The release of this consultation paper on ways to strengthen the governance and oversight of managed investment schemes is an important step in ensuring our regulatory systems remain fit-for-purpose,” he said.

The consultation paper seeks views from stakeholders on proposals for enhancing Managed Investment Scheme governance and oversight by ASIC, as well as improving ASIC’s visibility of superannuation switching.

“Good governance practices support sound decision-making by boards by ensuring they are well-informed, act in the best interests of investors and are less susceptible to conflicts of interest.”

ASIC itself has previously highlighted that there needs to be tighter regulation on the broader managed investment scheme regime, however as things stand it has little leeway in granting approval.

“We must register a scheme within 14 days of lodgement unless it appears that the application, scheme documents or proposed responsible entity and compliance plan audit arrangements do not meet the relevant statutory requirements,” the regulator said last year.

It added: “The Australian managed investment scheme regime is relatively open and liberal by international standards. Australian regulations mandate that an appropriately licensed entity operates the scheme, and that adequate disclosures of the nature, benefits and risks of the scheme are made to enable their offer to retail investors.”

The newly released consultation paper proposes to increase ASIC’s data collection powers on the retail MIS sector.

“These data challenges, including the lack of a recurrent data collection power for ASIC, both limits ASIC’s ability to identify red flags in a timely way and has increased the regulatory burden for industry, with overlapping and duplicative data requests,” the paper said.

“There are different types of information that ASIC could potentially collect on MISs, including data at the point of registration about the underlying nature of a MIS, ongoing recurrent data about certain aspects of MIS operations and alerts on certain types of events. ASIC could potentially collect a combination of all types of data.”

Speaking at the National Press Club in November, outgoing ASIC chair Joe Longo reiterated the regulator’s stance that there needs to be more “friction” in the process of members switching their super.

The superannuation-switching catastrophe that’s been unfolding with First Guardian and Master Shield and related funds, it all started with ordinary Australians, in many cases, moving, in my words, their super from a relatively safe, conventional environment into a high-risk environment,” the chair said at the time.

“And there’s plenty of blame to go around for what went wrong there. And one of the things we’re suggesting is that we need to slow people down a bit.

The government’s consultation has responded to this call, proposing that an obligation be placed on superannuation trustees to report to ASIC suspicious or anomalous patterns of behaviour, which the trustee “reasonably considers could place their membership at risk of significant detriment”.

“The new obligation could focus on detecting patterns of behaviour, as opposed to individual instances of potential misconduct at the time of the switch. Therefore, it would not conflict with existing timing and verification obligations for trustees when actioning rollover requests,” it said.

There is set to be more work in the space going forward as well, with the minister flagging that this is just the first tranche of the government’s “broader agenda” to strengthen consumer protections.

“The government will soon consult on additional proposals to tackle inappropriate lead generation, creating a safer framework for superannuation switching, and strengthening superannuation trustee governance standards,” Mulino said.

“There will also be consultation on ensuring the sustainability of the Compensation Scheme of Last Resort.”

Submissions on consultation paper can be made until 27 February 2026.

Keith Ford

February 11 2026

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