The collapse of Shield Master Fund and First Guardian has attracted significant media attention in recent months. However, many other court decisions that contain equally important lessons for investors, fund managers and responsible entities have received far less coverage. One such case is the June 2026 New South Wales Supreme Court decision in Garan Holdings v Stonepoint Capital Management.
This case has barely received any media attention, but it nonetheless highlights the risks that can arise when governance, oversight and independence are lacking.
For anyone operating a managed investment structure, the decision is a timely reminder to undertake a health check of their trustee and AFSL arrangements, particularly where the trustee, fund manager and related parties are closely connected.
What Went Wrong?
The case concerned investments of almost $18 million into the Stonepoint Capital Fund. Investors were led to believe that their funds would be invested in a secure structure with liquidity, transparency and defined returns. Instead, the Court found that investor funds were largely lent to a related entity for foreign exchange trading activities on a substantially unsecured basis, with little protection for investors if things went wrong. The trading strategy failed, resulting in losses exceeding $10 million.
The New South Wales Supreme Court held an accountant and financial adviser personally liable for the client losses. The adviser recommended and controlled investments in an unregistered fund that funnelled money into a related-party foreign exchange trading scheme.
The Court found extensive misleading conduct and breaches of duty. Importantly, the structure involved overlapping roles between advisers, directors, the AFSL holder and entities receiving investor funds. This concentration of influence reduced the level of independent oversight that could have identified and challenged key risks before investor capital was exposed.
While every investment carries risk, governance failures are different. They often arise not because markets move unexpectedly, but because there are insufficient controls, independent review and accountability mechanisms within the structure itself.
What Is an AFSL and What Does It Do?
An Australian Financial Services Licence (AFSL) is issued by the Australian Securities and Investments Commission (ASIC) and authorises a business to provide specified financial services in Australia. The licence holder must comply with legal obligations relating to compliance, risk management, financial resources, client protection, disclosure and the monitoring of authorised representatives.
Importantly, an AFSL is not a guarantee that an investment is safe or that investor funds are protected from loss. Nor is it a substitute for robust governance. While a fund manager is responsible for implementing the investment strategy and managing portfolio decisions, the trustee is responsible for protecting investors’ interests, overseeing compliance with governing documents and ensuring the fund operates in accordance with its obligations.
Why Independence of the Trustee Matters
The Garan Holdings decision demonstrates the value of genuine independence within investment structures. Where the trustee is independent of the fund manager and promoter, it can provide an important layer of oversight and challenge.
An independent trustee may be better positioned to:
• Review related-party transactions.
• Monitor compliance with trust deeds and disclosure documents.
• Assess whether investor funds are being used for approved purposes.
• Escalate concerns before issues become significant losses.
• Provide objective governance oversight free from commercial conflicts.
In many failed investment structures, governance issues emerge when too much control is concentrated within a small group of related entities or individuals. Independence introduces accountability and transparency, which are critical safeguards for investors.
How The SILC Group Helps Protect Investors
At The SILC Group, fund trusteeship sits at the centre of our service offering. Our responsibility is to provide professional trustee services, governance oversight and administrative support that strengthen fund integrity and investor confidence.
As an independent trustee for funds across a range of asset classes, The SILC Group brings:
• Separation between governance and investment management.
• Oversight of trust deed compliance and fund operations.
• Monitoring of key obligations and reporting requirements.
• Review of conflicts and related-party arrangements.
• Experienced governance professionals focused on investor protection.
Had an independent trustee with clear governance authority been actively overseeing a structure like the one examined in Garan Holdings, many of the issues identified by the Court may have been detected earlier or challenged before substantial investor losses occurred.
Is It Time for a Health Check for Your Fund?
The lessons from Garan Holdings are clear. Strong investment performance does not replace strong governance. An AFSL alone is not enough. Trusteeship arrangements, independence, conflict management and oversight all matter.
Your licence may have some vital signs at risk.
If your fund structure relies on related-party trustees, interconnected governance arrangements or legacy AFSL frameworks, now is the time to review whether those arrangements remain fit for purpose.
The SILC Group offers independent trustee services designed to strengthen governance, improve investor confidence and reduce operational risk.
Call SILC for a free health check on your ASFL
We can provide a complimentary trustee and AFSL health check to help identify potential vulnerabilities in your business before they become significant issues.
If you would like to discuss the governance of your fund structure, contact The SILC Group for an obligation-free conversation and a free five-point health check. Strong governance starts with independent oversight.
This article has been prepared by The SILC Group (ABN 71 610 343 541). The information in this article is general in nature and is provided for information purposes only. It is not legal, financial or professional advice. You should obtain specific, independent advice relevant to your circumstances. While reasonable care has been taken in preparing this article, no representation or warranty is made as to the accuracy, completeness, or currency of the information. To the maximum extent permitted by law, The SILC Group, its related entities, directors, officers, employees and agents accept no liability for any loss or damage arising directly or indirectly from reliance on the information contained in this article.
