Why mortgage brokers are paying for First Guardian

ASIC this week sued the two men who ran First Guardian, the investment fund that took more than $600m from over 6,000 Australians and left most of them waiting to find out how much they’ll get back. Mortgage brokers never sold the fund, and none of the money went through the broking channel. The industry is still helping to pay for it.

The regulator has filed civil penalty proceedings in the Federal Court against David Anderson and Simon Selimaj. Anderson was managing director of Falcon Capital, the company that ran the fund, and Selimaj was its executive chairman. ASIC alleges that about $270m of investors’ money went into funds Falcon controlled. From there, the regulator says, it was paid out to restaurants, a brewery, offshore entities and property developers with little paperwork or security. It alleges that at least $57m ended up with entities controlled by the two men, and that at least $27.9m went into property developments on an unsecured basis. None of the allegations has been tested in court.

The route the money took into the fund matters for brokers. ASIC says lead generators cold-called people and passed them to financial advisers. Those advisers told clients to move their super into retail platforms or set up SMSFs, and then invest in First Guardian. The fund was a managed investment scheme, not a mortgage product, and brokers had no role in selling it.

What the? How mortgage brokers are left holding the bill

The cost reaches brokers through the Compensation Scheme of Last Resort. The CSLR pays people who win a case at AFCA but can’t collect because the firm at fault has collapsed. It is funded by a levy on financial services firms.

The scheme’s costs have risen sharply. In July the CSLR put its 2026–27 bill at $198.1m, up from an earlier estimate of $137.5m. Most of the increase came from Dixon Advisory claims and the first round of Shield and First Guardian cases. Personal financial advice accounts for $190.3m of the total, against an annual cap of $20m per sector. Liquidators have so far recovered only about $8m from First Guardian’s $512.8m portfolio, so further claims on the scheme look likely.

Everything above the cap has to be raised through a special levy, this year about $170.3m. For the first time, Treasury is sharing that cost out under the “waterfall” model the government announced in August:

• Tier 1: financial advisers pay another $10m on top of their $20m annual levy.
• Tier 2: responsible entities of managed investment schemes, the category Falcon belonged to, pay $40m.
• Tier 3: the remaining $120.26m is spread across 21 retail-facing sectors that haven’t hit their own caps. Mortgage and finance brokers are one of them.

Under Treasury’s proposal, credit intermediaries would pay $7.79m, compared with about $668,000 under last year’s special levy. With the sector’s ordinary annual levy of about $2.1m, the total for 2026–27 comes to nearly $9.9m.

Read next: Shock CSLR estimate creates funding shortfall for financial misconduct victims

Paying for others’ failures

Broker groups have objected for more than a year that the sector is paying for problems in other parts of financial services. MFAA chief executive Anja Pannek has called special levies on brokers “unfair, disproportionate, and inconsistent with the purpose of the CSLR”. FBAA managing director Peter White was blunter when the first special levy was announced last December: “it’s not our fault”.

The MFAA has asked Treasury to explain how this year’s figure was calculated. It wants to know why financial advice was asked for only $10m under Tier 1 when the framework allows up to $20m. It has also asked whether sectors closer to the losses should pay before costs reach brokers. The association says the share is based on how much regulatory work ASIC does in each sector, not on how much harm each sector caused. It points out that ASIC’s heavy focus on broker compliance with the best interests duty may be pushing the number up.

On the MFAA’s own rough calculation, the levy works out to about $67 per credit representative, up from $5.72. That won’t break any brokerage. The concern is the direction of travel and the principle behind it. It has long argued that the sectors most directly linked to consumer harm should pay first.

Read next: Don’t penalise brokers for CSLR shortfall, FBAA warns

What brokers should watch

The levy is charged to credit licensees, but it may not stop there. The MFAA has warned that costs could be passed on to brokerages and individual brokers under their commercial agreements. Brokers working under an aggregator’s licence should check how their agreement handles regulatory levies.

This is also unlikely to be the last bill. The CSLR’s actuaries included $30.2m for Shield and First Guardian claims this year and expect that figure to grow as AFCA works through its backlog. ASIC’s case against Anderson and Selimaj won’t change that. Any penalty ASIC wins against Falcon itself will not be collected, so that whatever money is left goes back to investors.

ASIC’s First Guardian enforcement page lists all its actions so far.

Read next: ‘A bad precedent’: Frustration mounts as brokers forced to cough up for CSLR shortfall