InterPrac is accused of failing to ensure representatives they authorised were complying with the law when they recommended 6843 clients invest around $677 million in two now-collapsed funds.
"No competent financial adviser could have recommended investment in Shield or First Guardian (Master Funds)," the Australian Securities and Investments Commission (ASIC) said in Federal Court documents lodged on Wednesday.
Both funds allegedly had exorbitant fees, opaque investments and delivered millions of dollars in payments to Venture Egg and its boss Ferras Merhi, one of InterPrac's former authorised representatives.
The court documents say Mr Merhi told InterPrac in June 2024 companies he controlled received nearly $20 million from the two funds.
"Despite this, InterPrac permitted Venture Egg and Merhi to remain as its authorised representatives until 31 May 2025," ASIC said.
InterPrac allegedly relied exclusively on external research before approving Shield and First Guardian for advisers and even when it did institute a temporary hold on new investments, they failed to maintain it.
Investors may not have even agreed to having their super savings transferred into the dodgy funds after InterPrac allowed Venture Egg to use "negative consent" to alter portfolios.
The practice allows advisers to adjust their client's investments by issuing a statement saying the client would consent unless they explicitly said otherwise.
InterPrac was contacted for comment.
The collapse of Shield and First Guardian has been one of ASIC's most complex cases, with the regulator saying more than 40 investigators are working full-time to bring those responsible for the losses to justice.
"What we are talking about here is an industrial-scale misconduct that involved a range of players," ASIC deputy chair Sarah Court said on Wednesday.
"We are very methodically working through them in order to make sure ... we hold those companies and individuals involved to account."
The regulator is also initiating legal action against fellow advice licensee MWL and research house SQM for their roles in duping unsuspecting customers.
ASIC has launched a separate legal case against Mr Merhi alleging he engaged in unconscionable conduct and failed to act in the best interests of clients while receiving millions of dollars.
People who invested in Shield or First Guardian should contact the respective liquidators for updates on recovering investments and may be entitled to lodge a complaint with the Australian Financial Complaints Authority.
The case against InterPrac will return to the Federal Court at a later date.
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