ASIC's first strike on a research provider: what the SQM litigation means

ASIC has taken enforcement action against the research house, SQM Research Pty Ltd, to hold it responsible over its role in assigning favourable ratings to the now collapsed Shield Master Funds. It is the fifth enforcement proceeding commenced by ASIC in relation to the Shield Master Funds, in which over 5,800 investors invested their money.

ASIC's enforcement action against SQM – the first against a research provider – highlights that research houses or providers must have adequate processes in place to carry out diligence and verification when publishing ratings or opinions. ASIC's Deputy Chair, Sarah Court, made clear in commencing the proceedings that ASIC's expectation is that:

"Research houses have a responsibility to ensure they obtain the information needed to prepare their reports, take real care and skill in assessing that information and to present that information accurately."

ASIC's allegations about SQM's role in connection with the Shield Master Fund

ASIC's investigations into the collapse of the Shield and First Guardian Master Funds is one of the most complex cases ASIC has overseen. ASIC's priority is not only returning any available funds to investors, but holding those responsible to account. To date, ASIC has taken enforcement action against the former directors, financial advisers, superannuation trustees, fund operators and now also SQM as the research provider.

SQM charged Keystone Asset Management (the responsible entity of Shield) fees (in this case, $24,000 ex GST) to prepare an independent report which would remain valid for 12 months from the date of issue.

ASIC alleges that SQM subsequently assigned a "favourable" investment grade ratings to the Shield Master Fund across three successive reports, despite records allegedly showing glaring data gaps. Those endorsements enabled access to major superannuation platforms and influenced the product selection decisions of numerous financial advisors, resulting in several financial advisers and superannuation trustees recommending Shield to investors.

However, by the end of 2023, Shield Master Fund had entered liquidation amongst allegations of misused investor money, leaving thousands of Australians facing substantial losses and prompting a wave of complaints to regulators, including ASIC.

More specifically, ASIC alleges that SQM:

• Did not obtain or verify key information needed to properly assess Shield's information (including PDSs, audited accounts, constitutions, TMDs and completed questionnaires);

• Skipped or inadequately conducted due diligence meetings with key parties, including the underlying managers;

• Failed to resolve or even address inconsistencies in the information it received from Shield;

• Misstated Sheild's actual vs target allocations, underplayed the proportion managed by related entities, and incorrectly suggested an 80/20 multi-asset /property spilt; and

• Misrepresented that it had a reasonable basis for giving Shield a “Favourable” rating and had exercised reasonable care and skill in doing so.

Ultimately, ASIC alleges that the SQM reports did not accurately reflect the standard, quality, value, or grade of Shield classes and that reflected deficiencies in SQM's internal rating lifecycle process.

By reason of that conduct, ASIC alleges that SQM engaged in misleading or deceptive conduct (contrary to section 12DB of the ASIC Act) by making statements about the funds' asset allocation, risk profile, governance standards and likely performance, that were either inaccurate or unsupported by reasonable grounds. ASIC pairs those claims with assertions that SQM contravened section 912(1)(a) of the Corporations Act, the duty to provide financial services efficiently honestly and fairly, because it failed to insist on basic documentation, reconcile contradictory information or challenge issuer supplied data.

ASIC's expectations of research houses

ASIC views research houses as "important gatekeepers" in the context of rating funds and investments, as they can form part of a "critical line of defence against poor quality investments or unsuitable products".

The proceeding comes at a time where ASIC have openly voiced their increased scrutiny of research houses as part of their broader focus on private credit. 

On the same day that ASIC filed its pleadings against SQM, ASIC also released its 2026 enforcement priorities, one of which was 'poor private credit practices'.

On 5 November 2025, ASIC also released Report 820: Private credit surveillance report: Retail and Wholesale surveillance, which observed that external research houses played an important function in the funds management sector and that research houses were expected to undertake rigorous due diligence to substantiate any ratings issued. ASIC stated in that report:

"Given the considerable influence a rating can have on a fund's distribution and an investor's decision, research houses hold a unique position within the market….It is therefore important for research houses to ensure the robustness of their rating processes in the private credit market, to help influence the industry practices and support the trust and confidence in this market."