By Michelle Tay, The SILC Group
Over the past few years, the collapse of several high-profile investment structures has dominated headlines and reignited conversations about investor protection, fund oversight and governance standards.
Most recently, much of the public attention has focused on the failures of Shield Master Fund and First Guardian. Yet some of the most important lessons for our industry are often found in court decisions that receive far less publicity.
One such example is the New South Wales Supreme Court’s June 2026 decision in Garan Holdings v Stonepoint Capital Management.
While the case has attracted limited media coverage, it highlights a challenge that those of us working in funds management and trusteeship understand all too well: investment losses are not always the result of market conditions. Sometimes they stem from weaknesses in governance, oversight and accountability.
For investors, fund managers and trustees alike, the decision serves as a powerful reminder that governance structures matter.
When Oversight Fails
The Court examined investments of almost $18 million into the Stonepoint Capital Fund.
Investors believed they were participating in a structure that offered transparency, liquidity and a defined investment approach. Instead, the Court found that a substantial portion of investor funds was advanced to a related entity to support foreign exchange trading activities, largely without adequate security or meaningful protections should things go wrong.
When the trading strategy failed, losses exceeded $10 million.
Importantly, the Court found extensive misleading conduct and breaches of duty. An accountant and financial adviser was held personally liable after recommending and controlling investments that ultimately channelled investor money into the related-party trading arrangement.
What stands out to me is not simply the loss itself, but the concentration of influence across the structure. The case involved overlapping relationships between advisers, directors, the AFSL holder and the entities receiving investor funds. When too much control sits within a tightly connected group, genuine challenge and independent scrutiny can become difficult.
That is often where risks begin to emerge.
Governance Risks Are Different From Investment Risks
Every investor understands that markets rise and fall.
No governance framework can eliminate investment risk, nor should it attempt to.
However, governance risk is different.
Governance failures tend to occur when key decisions are not independently reviewed, conflicts are not effectively managed, or accountability mechanisms are weakened. These issues are often preventable because they arise from the way a structure is designed and supervised, rather than from external market forces.
The Stonepoint case is a reminder that strong governance should never be viewed as a compliance exercise. It is a critical safeguard for investors and an important risk management tool for fund operators.
The AFSL Is Important, But It Is Not a Guarantee
One misconception that still exists among some investors is that the presence of an Australian Financial Services Licence automatically means an investment is safe.
It does not.
An AFSL is an important regulatory framework. Issued by ASIC, it authorises businesses to provide specific financial services and imposes obligations around compliance, risk management, financial resources, disclosure and client protection.
But an AFSL is not an insurance policy against poor governance.
The real test lies in how a fund operates day to day. Effective governance depends on the quality of oversight, the management of conflicts, the strength of compliance processes and the willingness of those involved to ask difficult questions when concerns arise.
That is where trustees play a vital role.
Why Independence Matters
One of the clearest lessons from the Stonepoint decision is the value of independence within investment structures.
Where a trustee is genuinely independent of the fund manager, promoter and related parties, it can provide an additional layer of scrutiny that may help identify issues before they escalate into significant losses.
An independent trustee is often better positioned to:
- Review related-party transactions objectively.
- Monitor compliance with trust deeds and disclosure documents.
- Confirm investor funds are being applied for approved purposes.
- Escalate concerns when risks emerge.
- Provide governance oversight free from commercial conflicts.
In our experience, many of the most significant governance failures across the industry share a common characteristic: too much influence concentrated within too few hands.
Independence introduces accountability. Accountability promotes transparency. And transparency helps build investor confidence.
Those principles remain as important today as they have ever been.
The Role We Play at The SILC Group
At The SILC Group, trusteeship is not simply an administrative function. It is a responsibility.
Our role is to provide independent trustee services, governance oversight and operational support that help strengthen the integrity of fund structures and protect investor interests.
We work across a diverse range of asset classes, bringing:
- A clear separation between governance and investment management.
- Oversight of trust deed compliance and fund operations.
- Monitoring of key reporting and regulatory obligations.
- Independent review of conflicts and related-party arrangements.
- Experienced governance professionals focused on accountability and investor protection.
While no one can predict every challenge that may arise, strong governance significantly improves the likelihood that potential issues will be identified early and addressed appropriately.
The Stonepoint decision reinforces why that matters.
A Timely Opportunity for Fund Managers
For fund operators, advisers and licence holders, this case presents an opportunity for reflection.
Are your governance arrangements genuinely independent?
Are conflicts being actively identified and managed?
Is your trustee structure providing meaningful oversight, or simply meeting minimum requirements?
If your fund relies on related-party trustees, interconnected governance arrangements or legacy AFSL frameworks that have not been reviewed for some time, now may be the right moment to undertake a governance health check.
Strong returns are important. But they do not replace strong governance.
In the end, investor confidence is built not only on performance, but on trust, accountability and transparency.
And those foundations start with effective independent oversight.
Michelle Tay
The SILC Group
If you would like to review the governance framework of your fund or AFSL arrangement, The SILC Group offers a complimentary governance and licence health check by phone designed to help identify potential vulnerabilities and strengthen investor protections before issues arise. It is intended as a guide only and not intended to be a full and complete audit of your governance arrangements.
