The collapses of Shield and First Guardian have become some of the most significant reminders in recent years that product governance extends well beyond approved product lists and investment performance reports.
While the details of individual matters vary, the regulatory response has reinforced a broader message for AFSL holders and advisers: product due diligence remains a fundamental component of advice governance. During this quarter’s Compliance Committee Meetings, Cheyenne and the AICS team have specifically been discussing the ongoing regulatory fallout from Shield and First Guardian as a key industry risk for licensees and advisers.
Historically, many advice practices have relied heavily on external ratings, research providers, licensee approvals and platform availability when assessing investment products. While these tools remain valuable, recent events have highlighted the risks associated with over-reliance on third-party assessments.
Regulators increasingly expect firms to understand not only what a product claims to do, but also how it operates, where risks exist, and whether the product remains appropriate for the clients to whom it is being recommended.
The challenge is that due diligence is often viewed as a one-off activity completed when a product is first approved. In reality, product governance requires ongoing monitoring and critical assessment. A product that appeared appropriate at one point in time may present very different risks as market conditions, management structures or operational circumstances change.
ASIC’s continued enforcement activity relating to Shield and associated matters demonstrates that product oversight remains a significant regulatory focus. During June 2026, ASIC commenced proceedings against former Keystone Asset Management directors and compliance committee members over alleged Shield failures, reinforcing the regulator’s ongoing scrutiny of governance and oversight arrangements.
For advisers and licensees, these developments raise important questions:
- How often are approved products reviewed?
- What triggers a reassessment of product suitability?
- How are emerging risks identified and escalated?
- How much reliance is placed on external research?
- What evidence exists to support continued confidence in a product?
Product governance is not about predicting future failures. Even the most sophisticated due diligence processes cannot eliminate investment risk. However, regulators generally expect firms to demonstrate that reasonable steps were taken to understand the products being recommended and that governance frameworks are capable of responding when concerns emerge.
One of the recurring lessons from major product failures is that warning signs often appear long before formal regulatory action occurs. Changes in liquidity, valuation concerns, governance issues, distribution practices or operational structures may all warrant additional scrutiny.
Strong product governance frameworks generally include:
- Regular product reviews and monitoring.
- Escalation pathways for emerging concerns.
- Clear documentation of due diligence activities.
- Ongoing assessment of client suitability.
- Independent challenge and oversight mechanisms.
- Defined responsibilities for product governance decisions.
Importantly, product governance is not solely the responsibility of investment committees or research teams. Advisers, compliance personnel and Responsible Managers all play a role in identifying concerns and ensuring governance frameworks remain effective.
As regulatory expectations continue to evolve, firms that can demonstrate robust, ongoing due diligence are likely to be better positioned to respond to emerging risks than those relying solely on historical approvals.
Ultimately, product governance is not simply about selecting investments.
It is about maintaining confidence that those investments remain appropriate long after the initial recommendation has been made.
Call To Action
The AICS Compliance Committee Meeting is a quarterly meeting and training program designed to provide independent support, practical guidance and regulatory insights to Compliance teams, Responsible Managers and Licensees.
As regulatory expectations continue to evolve, staying informed about emerging risks, enforcement activity and governance obligations is critical. The Compliance Committee Meeting provides an opportunity to discuss current industry developments, share experiences with peers and gain practical guidance on strengthening compliance frameworks and risk oversight.
If you would like to learn more about the AICS Compliance Committee or discuss how your organisation can benefit from participating, contact Cheyenne and the team at [email protected] or call 07 3251 2481.
References
- Australian Securities and Investments Commission (ASIC), Regulatory Guide 104: Licensing – Meeting the General Obligations
- Australian Securities and Investments Commission (ASIC), Regulatory Guide 175: Licensing – Financial Product Advisers: Conduct and Disclosure
- 26-133MR ASIC sues former Keystone Asset Management directors and compliance committee members over alleged Shield failures | ASIC
