Treasury’s post Shield and First Guardian reforms: key implications for superannuation trustees

Submissions on the consultation papers are due by 22 May 2026.

These reforms are additional to the proposal in Treasury’s consultation paper in February 2026 to increase ASIC’s visibility of super switching.

Why this matters for superannuation trustees?

On 10 December 2025, the Australian Government announced a suite of measures to strengthen consumer protections and restore confidence in the superannuation and financial services sectors. These measures respond directly to the collapses of the Shield Master Fund (Shield) and the First Guardian Master Fund (First Guardian), which together affected approximately 11,000 investors and resulted in losses of up to $1 billion.

What the Shield and First Guardian matters exposed?

Shield and First Guardian were managed investment schemes made available as investment options on platforms, including superannuation platforms. Investors typically accessed these schemes through superannuation switching arrangements, often following contact from lead generators and subsequent advice from financial advisers. Together, the schemes attracted approximately $1.1 billion from around 11,000 investors before their collapse. Both schemes suspended redemptions in 2024 and were wound up in April 2025. ASIC has alleged significant misconduct including misapplication of investor funds, related-party investments, unmanaged conflicts of interest and potential misstatements regarding fund assets. Various cases arising from these collapses are currently before the Courts.

Treasury’s policy response

The Shield and First Guardian collapses have brought into focus several systemic concerns:

(a)  the risks arising from misconduct, member exposure to higher-risk products and inadequate diversification, which have caused significant financial losses;

(b)  the increased burden on the CSLR, an industry-funded scheme intended as a final avenue for victims of financial misconduct; and

(c)  the involvement of an interconnected chain of entities, including:

(i)   lead generators who contacted superannuation fund members and referred them to financial advisers;

(ii)  financial advisers who advised members to rollover their superannuation into a self-managed superannuation fund (SMSF) or a platform superannuation fund offering Shield or First Guardian as investment options; and

(iii)  platform superannuation trustees with governance arrangements that may not have been sufficient for the onboarding and monitoring of investment options.

These entities allegedly operated within an environment characterised by conflicted payments and high-pressure sales tactics.

Treasury is concerned about the following areas:

(a)  Click-bait marketing by lead generators, which resulted in members being connected to financial advisers who allegedly pressured them into switching their superannuation;

(b)  Platform Trustees’ broad legal and prudential obligations may not translate into consistently robust governance practices in all cases;

(c)  Superannuation portability arrangements may not provide sufficient time for member reflection and may not adequately inform members of material changes in risks and responsibilities when switching; and

(d)  Existing remediation pathways do not clearly allocate responsibility for losses where multiple entities are involved, creating uncertainty for affected consumers.

Enhancing member protections in the superannuation system

Strengthening platform governance

Superannuation trustees are already subject to comprehensive conduct and investment governance obligations under the SIS Act and APRA’s prudential standards, including SPS 530 Investment Governance. However, Treasury is questioning whether the current principles-based framework produces consistently robust outcomes across the platform segment, signalling a shift towards more prescriptive governance expectations.

The proposals for strengthening platform governance are:

(a)  Including a definition of ‘Platform Trustee’: Treasury proposes introducing a legislative definition to capture RSE licensees that allow members to select directly from a broad menu of investment options offering exposure to specific investments. This aligns with the existing disclosure trigger in section 1012IA of the Corporations Act. The definition would not capture trustees that exclusively offer pre-mixed, trustee-directed options that are not referrable to a specific financial product.

We consider that one option would be use the existing legal test in section 1012IA of the Corporations Act with additional exceptions for investment options that have less initial and ongoing due diligence risk associated with the Shield and First Guardian collapses (eg ADI bank deposits, risk insurance products, annuity insurance products, broad based index funds, LICs and ETFs, listed securities that are determined based on a pre-defined criteria such as those in the ASX 200).

(b)   Addressing the need for uplift in Platform Trustee governance standards: Some options have been proposed:

(i)  Requirement to set and enforce holding limits for investment options: Platform Trustees would be required to establish and implement minimum diversification requirements for each member’s portfolio through investment holding limits. These limits would need to account for both investment risk and exposure to governance risk associated with particular investment options.

(ii)  Codified due diligence requirements: Treasury proposes making Platform Trustees’ initial due diligence obligations more explicit through legislation. This could include requiring a documented onboarding framework, consistent product assessment criteria and retention of evidence demonstrating how onboarding decisions were reached.

(iii)  Limiting certain conflicted arrangements and payments: The Shield and First Guardian collapses involved allegations of marketing and other payments associated with product distribution. Treasury is concerned that such payments may discourage Platform Trustees from applying rigorous onboarding due diligence and taking timely action when concerns emerge—including restricting inflows, enforcing holding limits or removing products from the platform. A key design consideration is how to target harmful conflicts without capturing legitimate third-party arrangements that support platform operations.

(iv)  Restricting certain trustee operating models: This option addresses concerns about ‘trustee-for-hire’ arrangements, where an external licensed entity is appointed to act as trustee of an RSE rather than the trustee being integrated with the entity that designs and operates the product offering. Treasury has asked whether additional regulatory constraints may be warranted where such governance models effectively separate the trustee from the platform’s product offerings in a way that may undermine effective oversight. Options range from targeted requirements (conditions that must be met for such models to operate) through to prohibitions on particular arrangements.

Increase penalties under the SIS Act

To support the proposed reforms to uplift trustee governance and accountability, Treasury has asked whether the existing penalties under the SIS Act are proportionate to the potential harm to members and are sufficient to incentivise compliance.

Treasury has highlighted a significant disparity between SIS Act and Corporations Act penalties. The maximum civil penalty under the SIS Act for investment covenant contraventions is currently 2,400 penalty units (approximately $792,000), whereas Corporations Act penalties can reach 50,000 penalty units or 10 per cent of annual turnover. Treasury proposes either doubling SIS Act penalties or aligning them with the Corporations Act.

Profit-to-member funds may be affected if their trustee capital modelling necessitates additional trustee capital reserves to account for these potential increased penalties. For-profit superannuation trustees would also be affected, as increased penalty exposure may reduce expected long-term returns from superannuation businesses.

Introduce a waiting period for inter-fund superannuation switching

Existing regulatory protections—including the best financial interests duty, Statement of Advice requirements and fee deduction restrictions—did not prevent the superannuation switching framework from being exploited. Treasury is particularly concerned about switches involving significant risk profile changes and increased member responsibility when moving to SMSFs or platform products.

The proposals for inter-fund superannuation switching are:

(a)  Introduce a waiting period for inter-fund superannuation switching: Members making certain rollover requests would be required to confirm their request with the transferring fund after a mandatory waiting period (for example, five days). The transferring fund would be obliged to notify the member of relevant risks associated with the rollover after receiving the initial request. If confirmation is not received, the rollover request would lapse after a further three business days.

The options for this proposal are:

(i)  Apply the waiting period to all inter-fund superannuation switches: All rollovers between superannuation funds would be subject to the five-day waiting period. A prescribed notice would be required to be provided to the member. The three-day rollover period would commence only after the member confirms their rollover request.

(ii)  Waiting period applies to certain categories of inter-fund switches: This option would apply the five-day waiting period only to rollovers meeting certain criteria, such as transfers from an APRA-regulated superannuation fund to:

(A)  a SMSF where members are outside the APRA regulated environment; and

(B)  an APRA-regulated ‘Platform RSE’ (as defined above) or an APRA-regulated superannuation fund offering ‘high-risk’ products. A ‘high-risk’ product definition would need to measure risk objectively and fairly. Treasury acknowledges that capturing risk (particularly governance risks that may cause fund failure) is challenging and requires extensive due diligence. Such a definition may also affect sectors more heavily reliant on unlisted or externally managed investment vehicles, including transport infrastructure, real estate, private credit, private equity and renewable energy or resource extraction projects.

Prescribed disclosure topics could include: protections members lose when changing regulatory environment; suitability guidance for SMSFs and platform products; comparative fee information; expected adviser conduct; insurance implications; and investment risks including diversification.

Limit fee deductions for switching-related financial advice

The Shield and First Guardian collapses highlighted conduct where switching advice was provided at scale, with members’ superannuation balances funding advice fees. ASIC’s May 2024 review noted that some high-pressure switching business models provided ‘unnecessary, generic, and inappropriate advice’. The proposed changes seek to balance reducing incentives for inappropriate switching with maintaining access to financial advice.

(a)  Prohibit fee deductions for switching-related financial advice: Advice fees cannot be deducted if the advice is to switch superannuation funds for a member’s current balance or future contributions. Financial advisers would be required to disclose to clients that they must pay for the cost of any financial advice to switch superannuation funds out of their own pocket. Superannuation trustees would not be able to allow an advice fee deduction from a member’s account if the SOA recommended a superannuation switch.

As identified by Treasury, this option may create further risks such as financial advisers restructuring their fees by providing free switching advice. In addition, for those members who have satisfied a condition of release a financial adviser may assist a member to withdraw a benefit (that once withdrawn is outside the superannuation system) to pay the financial adviser.

Alternatively, fee deductions could be prohibited only from Platform RSEs, for new members during a prescribed period, or based on age or balance thresholds.

(b)  Codification of obligations on receiving funds to review advice fee deductions: ASIC and APRA have stated that trustees are not required to assess advice quality, value or appropriateness, with the result that trustee oversight of advice fee deductions has tended to focus on process compliance rather than substantive scrutiny. In its May 2024 review, ASIC highlighted that existing risk-based controls have not always detected or responded to systemic switching activities associated with cold calling and high-pressure sales models.

Treasury is considering codifying one or more of the following mechanisms for a receiving trustee to review advice fee deductions.

(i)  Mandatory review of advice fee deductions following a switch: The trustee of a receiving fund would be required to review advice fee deductions in prescribed circumstances such as the first deduction after a switch. Trustees would be required to:

(A)  be satisfied that a switching related fee is reasonable, having regard to the nature and scope of the advice, the member’s circumstances and the fee relative to the member’s balance; and

(B)  confirm that fee deductions align with the advice provided and the actions implemented following a switch (eg that the fee relates to documented advice and the member’s superannuation interest).

(ii)  Mandatory fee caps on switching-related advice deductions: A mandatory fee cap would apply to advice fees deducted after a switch. ASIC’s May 2024 review highlighted wide variation in existing practices, with some caps set at levels that permit significant erosion of member balances (for example, $20,000 or 5% of a member’s balance). Options under consideration include a lower absolute dollar cap, a percentage-based cap, or a combined or tiered model. The cap may be limited to the first deduction following a switch.

(iii)  Explicit adviser and licensee onboarding and monitoring requirements: Clearer minimum expectations for adviser and licensee onboarding and monitoring in relation to switching related advice fee deductions. Trustees would be required to implement explicit onboarding and ongoing monitoring processes focused on entity level suitability rather than assessing the quality of individual advice. Due diligence could include scrutiny of business models that may present heightened risks. This could include high volume switching or reliance on lead generation.

Requiring Platform Trustees to compensate members for eligible losses

The Shield and First Guardian collapses affected approximately 11,000 Australians, with up to $1 billion in losses. Treasury is questioning the role Platform Trustees should play in compensation outcomes where members experience financial losses associated with investment options on their menus.

The options being considered to address gaps in the superannuation compensation framework are:

(a)  Obligation on ‘Platform Trustees’ to compensate members for eligible losses: This proposal would impose a legal obligation on Platform Trustees to compensate members for ‘eligible losses’—defined as financial losses arising from external fraud or theft that result in product collapse, excluding losses from ordinary investment performance or market volatility. Under Treasury’s preferred model, an independent decision-maker would determine whether a qualifying loss event has occurred and trigger the compensation obligation. Compensation would be funded via trustee capital (either pre-funded reserves or post-event funding).

(i)  Funding of member compensation: Treasury is considering whether Platform Trustees should hold pre-funded capital reserves (supporting faster compensation but increasing costs likely passed through to members via fees) or be subject to post-event funding obligations (carrying risk of limited capacity to raise funds if the trustee becomes financially distressed or insolvent following large-scale loss events).

(ii)  Eligible loss: An eligible loss would be a loss suffered by platform members due to the collapse of an investment product from an external event, such as fraud or theft. Importantly, the definition would not cover losses due to market volatility, general underperformance, or internal events such as trustee maladministration (which would typically be addressed through a fund’s operational risk financial requirement (ORFR)).

(iii)  Activation: An independent third party would determine when an eligible loss event has occurred, apportion liability, direct compensation and determine amounts payable.

(iv)  Determining compensation: Compensation options include initial capital invested, indexed amounts against a benchmark, or capped proportions of loss.

(v)  Interaction with existing redress mechanisms: The obligation would operate as the first redress pathway, with other mechanisms available where a Platform Trustee cannot meet its obligation.

The compensation framework raises significant prudential and commercial considerations for Platform Trustees. Pre-funded capital requirements could materially impact trustee business models, particularly for smaller platform operators, and may accelerate industry consolidation. Trustees should consider whether alternative mechanisms—such as enhanced crime or fidelity insurance requirements—could achieve similar consumer protection outcomes with lower systemic costs.

(b)  ASIC directions power (Remediation): ASIC would be given the power to direct a Platform Trustee (as an AFS licensee) to commence a remediation process in accordance with RG 277 (Consumer Remediation), where ASIC has reason to suspect that a trustee has engaged, or will engage, in conduct constituting a contravention of financial services law that may have led to member losses. However, as this would be a direction to commence a remediation process rather than to compensate members directly, this approach would afford the Platform Trustee greater discretion in determining whether, and to what extent, compensation is payable—which may result in inconsistent outcomes for affected members.

Curbing lead generation

The Shield and First Guardian collapses highlighted the role that lead generation can play in consumer engagement with financial products and the potential for consumer harm. Typically, investors and superannuation members who transferred their superannuation monies into these funds allegedly:

(a)  were contacted by lead generators after seeing a social media advertisement or using an online superannuation ‘health check’, ‘find my lost super’ or ‘compare my super’ tool, and were then referred to financial advisers; and

(b)  were advised to switch their investments or existing superannuation balances into a choice superannuation fund, or to establish an SMSF, to facilitate investment into Shield, First Guardian or both.

The Government is targeting four areas for potential reform, being:

(a)  enhancing accountability for the conduct of lead generators;

(b)  strengthening the hawking prohibition to capture inappropriate lead generation activities;

(c)  targeting remuneration structures which incentivise poor conduct; and

(d)  targeting superannuation advertisements for earlier intervention.

Lead generation activities

Lead generation refers to marketing and referral practices used to identify consumers, capture their data, and direct them towards a financial adviser or product provider. Treasury is particularly concerned with business models using comparison tools, online prompts, cold calls or ‘warm transfers’ to channel superannuation members into a sales funnel. Various remuneration structures are employed, including pay-per-lead models and performance-based pay tied to sales conversion—in some cases, lead generators receive a proportion of advice fees deducted from the consumer’s superannuation balance.

Weaknesses with the current laws

(a)  Financial advice laws: Lead generation commonly relies on advertising and promotional content (eg with advertisements and websites that provide comparative tables, rankings, calculators or ‘health check’ style tools) that may fall outside the definition of financial product advice where confined to factual information. There is uncertainty about when lead generation activities are captured within the AFS licensing regime, and enforcement is difficult where record-keeping obligations do not apply.

As a result, some practices that result in the collection of consumer information for the purpose of referral or sale to third parties such as advisers or licensees operate beyond regulatory reach despite significantly shaping consumer pathways.

(b)  Hawking prohibition: The Corporations Act prohibits unsolicited offers of financial products, with an exemption for personal advice. However, some business models have used click-bait advertising to obtain broad consent and exploit the personal advice exemption to ‘cleanse’ unsolicited contact, recreating the high-pressure selling conduct the hawking regime was designed to prevent.

(c)  Conflicted remuneration: The conflicted remuneration ban is intended to protect advice integrity, but complex remuneration and referral arrangements may prioritise lead volume over consumer outcomes. Third parties can be interposed to break the remuneration chain, potentially circumventing the ban even though advice providers still benefit from leads in ways that may influence their recommendations.

Reform options for enhancing accountability for the conduct of lead generation activities

(a)  Enhance accountability for the conduct of lead generation activities: Lead generators may use targeted messaging, comparative claims, pre-qualification questions or behavioural prompts to encourage consumers to switch or engage with particular products. Such activity may fall outside the scope of regulated financial services, and financial advisers who benefit may not be legally responsible for lead generator conduct.

Four options are being considered to address those regulatory gaps:

(i)  Bring prescribed lead generation activities into the regulatory framework: Certain lead generation activities would be prescribed as a type of financial service requiring an AFS licence. A ‘lead generator’ requiring a licence could include persons who collect and assess consumer information expected to be passed to advice licensees, sell consumer information resulting in product acquisition, or refer consumers to advice licensees. The definition would exclude incidental activities, general marketing firms and one-off referrals.

(ii)  Banning unlicensed communication to consumers about superannuation: an unlicensed person would not be able to provide information to consumers about superannuation for a commercial benefit. Such a ban would capture certain forms of marketing or educational content being provided by unlicensed providers.

(iii)  Enhance accountability of licensees for the conduct of lead generators: AFS licensees would be required to take reasonable steps to ensure leads or referrals are sourced in compliance with regulatory requirements—analogous to the UK framework. This would align responsibility with the entity that benefits from consumer interactions.

(iv)  Clarify and extend DDO to lead generation: Lead generation activities would be included in the DDO definition of ‘retail product distribution conduct’. However, this may not capture activity outside the distribution chain, may be ineffective where broad target markets apply, and would not capture lead generation resulting in personal advice referrals.

Reform options for extending anti-hawking activities

The hawking prohibition is intended to protect consumers from uninvited real-time contact. However, lead generators may use click-bait advertising to collect contact details and consent, and the personal advice exemption allows some models to ‘cleanse’ unsolicited contact through subsequent financial advice.

(a)  Enhance the conditions around consent: This option would tighten consent conditions, potentially through a broad ban on non-consumer-initiated real-time contact, or by requiring clear disclosure at the beginning of interactions including the purpose of contact, third parties with data access, fees or benefits the caller may earn, and the consumer’s right to withdraw consent.

(b)  Limit the exemption for financial advice: This option would limit the scope of the personal advice exemption so that hawking cannot be ‘cleansed’ through subsequent financial advice. This could be achieved by removing the personal advice exemption entirely, or by restricting it so that it applies only to existing clients of financial advisers or does not apply to superannuation products.

Reform options for targeting remuneration structures that may incentivise poor conduct

There are wide-ranging prohibitions on conflicted remuneration—benefits that could reasonably influence advice given to a retail client. The ban applies to licensees, their representatives, and product issuers or sellers.

(a)  Capturing lead generators under conflicted remuneration ban: This could be achieved by clarifying that third-party lead generators are considered representatives of product issuers/sellers, or by prohibiting remuneration of lead generation activities that could reasonably influence advice. Licensees would still be able to pay for lead generation services where arrangements do not compromise advice integrity.

(b)  Clarify or expand the scope of ‘benefits’: Treasury is seeking feedback on broadening benefits that constitute conflicted remuneration, including explicitly prescribing client flows as conflicted remuneration where likely to influence advice, deeming client flows from lead generation arrangements as conflicted, and narrowing the client benefits exemption to fees for actual services rendered.

Reform options for targeting advertising for early intervention

Consumers have increasing exposure to financial services marketing in the digital era. Advertising is typically the first stage of the lead generation funnel. Click-bait advertisements commonly attract consumers to provide personal information and consent to its use by third parties, including referral partners and financial advisers. Some lead generation advertisements may not be misleading on their face despite omitting the true purpose of the advertising activity.

(a)  Require superannuation advertisements to display AFS licence numbers: Promotions relating to superannuation could not be undertaken without an AFS licence, as such advertisements would be required to state the AFS licence number of the responsible party.

(b)  Expand ASIC’s stop order power: This could include extending the power to advertisements by lead generators, expanding omissions that trigger stop orders (including absence of AFS licence details), and lowering the evidentiary threshold—for example, where ASIC reasonably believes an advertisement has resulted in, or is likely to result in, substantial consumer harm.