The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against SQM Research Pty Ltd. ASIC alleges the research house published misleading “Favourable” ratings for the Shield Master Fund. The regulator claims SQM Research failed to meet the required standards in its reporting when issuing these ratings. SQM Research is a company that provides investment research and ratings on various financial products. Its reports are used by financial advisors to make recommendations to their clients.
According to ASIC, SQM Research issued reports in October 2021, March 2022, and October 2022 rating various Shield classes as “3¾ stars, Favourable”. The regulator claims that SQM Research did not properly verify information or address inconsistencies before issuing these ratings. ASIC alleges the firm misrepresented that it had a reasonable basis and exercised due care in giving the ratings.
The regulator further alleges that SQM Research understated related-party fund holdings and Shield’s asset allocation in its reports. Approximately 5,800 investors relied on financial advisors who used SQM Research’s reports to recommend Shield. These recommendations often involved rolling over existing superannuation balances into platforms that had onboarded the fund.
ASIC deputy chair Sarah Court stated that this case marks the first time the regulator has taken action against a research house. She emphasised that research providers are “important gatekeepers” in the financial industry. Court added that their reports must be accurate and well-substantiated to uphold investor confidence. ASIC is seeking pecuniary penalties and other orders against SQM Research.
