Per the Australian.

Shield Master Fund investors unknowingly played a key role in ensuring Sequoia Financial’s $40.5m sale of Morrison Securities succeeded after they were put into the stricken Shield fund by advisers linked to Sequoia through its subsidiary, InterPrac.

The Shield fund’s responsible entity handed $15m to Morrison buyer New Quantum as a loan in mid-2023, three months after New Quantum agreed to buy 80 per cent of the securities business.

This loan was crucial to keeping the Morrison deal alive, coming shortly before the August 31 deadline for the purchaser to make its final $15m payment to ASX-listed Sequoia.

..........

Sequoia’s links to advisers and funds

Many of Shield’s investors had their superannuation savings put into the fund by InterPrac-authorised representatives of advisers Venture Egg and Reilly Financial. Sequoia is InterPrac’s parent company and Sequoia’s CEO Garry Crole is also the managing director of InterPrac.

The Shield fund, structured as a managed investment scheme, only started taking investor money in early 2022 but by September 2023 it had $446m in super savings. By the time the corporate regulator halted investment into the fund in early 2024, 5800 investors had $480m of retirement savings tied up and impossible to access.

Shield collapsed last year and liquidators are currently working through how much money can be returned to investors who fear their wealth has been lost.

ASIC is investigating whether the fund and its directors misled investors and mismanaged funds.

ASIC is also investigating InterPrac and advice firms Venture Egg and Reilly Financial as part of its broader probe into Shield and another stricken fund, the First Guardian Master Fund.

InterPrac-licensed Venture Egg was run by Ferras Merhi, who is also under investigation by ASIC.

James Hird, Garry Crole and Merhi Ferras, centre.

Mr Merhi ran two advice shops, the aforementioned Venture Egg and Financial Services Group Australia (FSGA). FSGA is now in liquidation, and InterPrac cut ties with Venture Egg in May this year.

Between the two advice firms, Mr Merhi and his teams put more than 6000 of the 12000 affected investors into Shield and First Guardian, The Australian understands.

Both Shield and First Guardian were marketed as diversified portfolios that were delivering higher returns than those available in industry super funds.

Their rapid accumulation of client money was in large part due to lead generators that would cold call prospective investors and use aggressive tactics to link them up with advisers, sometimes in a three-way call.

An investigation by The Australian found that in some cases, Venture Egg financial advisers tipped clients into the Shield and First Guardian funds without their knowledge, listing one set of investments on statements of advice before switching investor money into others. Those other strategies were the two funds First Guardian and Shield, and a third fund, Euree Asset Management, run by former footballer James Hird.

As well as owning InterPrac, ASX-listed Sequoia has a 20 per cent stake in Euree, which counts InterPrac’s Mr Crole as a director and Mr Hird as its managing director. Euree has said it is a top performing fund and all redemption requests were being honoured. The Australian is not suggesting any wrongdoing by Euree.

Venture Egg’s Mr Merhi has previously outlined to The Australian how he operated a negative consent model, meaning if clients didn’t reply to investment change requests they were assumed to give consent.

“Basically, if you’ve emailed and you’ve given a significant amount of time for the client to respond, and then the client doesn’t respond, then consent by acquiescence,” Mr Merhi explained.

The Australian has spoken to a number of advisers who dispute the legitmacy of negative consent.

InterPrac previously told The Australian it ordered advisers to stop putting client superannuation money into Shield and First Guardian in mid-2023 “once unusual volumes were observed”.

But it did not inform ASIC at the time, it said, because “there was no evidence of any inappropriate management of the said funds”. It took the hold off First Guardian in September of that year meaning new capital could be accepted.

The Australian has seen evidence suggesting Venture Egg clients had savings moved into both funds during the lockout period, which came after Sequoia had agreed to sell Morrison to New Quantum, but before the transaction had completed. The Australian is not suggesting InterPrac or Sequoia knew the source of New Quantum’s funds at the time.

As a licensee, Interprac would have clipped the ticket on advice given to clients by Venture Egg and Reilly Financial advisers, typically between 5 and 10 per cent of the client fee.

A spokesman for Sequoia said the firm “takes its corporate responsibilities seriously and does not comment on speculation. The company believes that the questions infer factually incorrect and misleading claims”.

More issues at SEQ - FAAA questions missing million from Libertas - Professional Planner

$50M Market Cap, $16M Cash, $5M in investments.

$8.6M in operating profit - including equity accounted investments.

Ongoing gross Divi yield (excl. special) of about 16%.

So many warts but so cheap.

Seems likely that SEQ is looking to get rid of Libertas (the consolidation they mentioned to reduce costs)

• Sequoia down (-2) after losing 2 at Libertas. Note: Sequoia are also moving advisers from Libertas to Interprac.

Link - Adviser Weekly Insights plus SMSF Statistics March 16, 2023 — Wealth Data

Wealth management software business New Quantum is understood to have lobbed a bid for ASX-listed peer Sequoia Financial’s equities clearing business Morrison Securities.

Street Talk understands New Quantum – which burst into dealmaking spotlight last year with a bid for Openmarkets – is in talks to acquire the Sequoia unit which sells white-labelled clearing and stockbroking solutions to third-party institutional and adviser networks.

Sequoia requested a trading halt on Tuesday morning, saying it was in the final stages of negotiating a partial divestment of a subsidiary.

New Quantum’s interest comes after Morrison Securities’ revenues fell 7 per cent in the December half to $14 million amid a lull in trading volumes. It made $4.4 million gross profit.

Morrison pulled in 23 per cent of Sequoia’s $61 million group revenue for the half.

Updated: Mar 7, 2023 – 5.15pm. Data is 20 mins delayed.

It’s one of the business’s four units divisions: direct investment division, professional services, licensees services division and equity markets division. Sequoia had a $69.6 million market capitalisation.

Interestingly, New Quantum’s tilt at Openmarkets in 2022 was said to have failed amid concerns around the acquirer’s funding capability.

Garry interview a bit more colour - to the ASX announcement PI dispute hits Sequoia half-year earnings guidance - Professional Planner

The licensee provider made an insurance claim but a dispute with the PI insurer has meant the licensee is paying for the remediation out of pocket in the meantime while it settles the dispute with the insurer.

...

Sequoia FG chief executive Garry Crole tells Professional Planner there were several claims against the adviser that AFCA made rulings on going back to 2019.

“That adviser has been terminated since 2020 but the licensee still has an obligation to make the payments,” Crole says.

“The insurance company denied liability at first but we’re fighting that. We’ve appointed lawyers and awaiting an outcome.”

...

“We believe this half-year period is a disappointment and an aberration but we’re on track to re-commence and be in a strong position,” Crole says

...

The direct investment division fell short of the EBITDA budget by $500,000 due to several media related purchases.

“We made an acquisition on the media side with Share Café, Informed Investor and Corporate Connect,” Crole says.

“Three businesses that we acquired last year, and it has taken longer to integrate those. There’s been a slowing of advertising and integration costs so that’s hit us back about half a million dollars as well.”

Earnings downgrade - CAS10211831 3477-6340-2528 (markitdigital.com)

Some of the factors had already been flagged in recent months but still tough when they're trying to build market confidence.

A raise to the upcoming dividend is the sole consolation at the moment reflecting Mangement's confidence in the future.

Interesting takeaways:

Key view still see themselves as undervalued, 59% owned by insiders so difficult for any outsider to takeover.

Open to selling part of the business to realise sum of the parts valuation - subject to price.

Didn't answer my question on the buyback on why it isn't more aggressive though.

Interesting re ASX dropping blockchain replacement to CHESS.

Morrisons (SEQ) I believe invested to prepare so hopefully can get a rebate as indicated below:

Per AFR

ASX is considering providing rebates to customers who have invested in building the replacement CHESS project.

ASX managing director Helen Lofthouse again apologised for the disruption, saying that the company is cognisant of the work customers have done on the project.

“One of the approaches you’ve seen us use when there are issues for our customers is we absolutely have gone through rebate processes from time to time to address customer issues.

“That’s certainly an approach that we’ve used in the past in this kind of situation.”

Looks like Acorn Capital is building up their position and probably who is driving the recent uptick in traded volume.

Not sure which vehicle but their listed LIC has an interesting mix of stocks, I dont know too much about them. Look to have okay performance longer term but not outstanding. Latest fund updates don't have anything on SEQ so maybe next quarter.

This has to be the most frustrating buyback, they start buying back at $0.57 but the share price falls a further 10% and they stop buying back shares despite using less than 7% of the facility. Do they see value in their own shares or not?

We may have seen the worst of the industry exits with growth last week for the first time in a while:

Key Adviser Movements This Week:

• Net Change of advisers +9
• 35 Licensee Owners had net gains for 44 advisers
• 31 Licensee Owners had net losses for (-38) advisers
• 2 new licensees commenced and (-2) ceased
• 11 Provisional Advisers (PA) commenced and none ceased.

Pleasingly SEQ also saw growth -

"A good number of licensee owners (35) did manage net growth this week. Sequoia via Interprac gained the most at 5 with six appointment and one loss. Two of the advisers came from Nextplan and two from a now closed licensee. Castleguard via its licensee Lifespan was up net 3, which included picking up two advisers from AMP.

Three licensee owners were up plus 2, these being Fortnum which included one PA, Findex and a new licensee with advisers moving away from Crown Wealth. A long tail of 30 licensee owners up net 1 including Chris Brycki of Stockspot fame, and Shartru gaining an adviser from FYG Planners."

Financial Adviser Movement Oct 13 2022 — Wealth Data

Reporting on the struggles of the financial advice industry - The profit struggles of financial advice licensees laid bare - Financial Newswire. I know for a fact that many publicly listed companies are trading at lower than private market multiples making the typical rollup strategy untenable.