Just when Netwealth Group Ltd (ASX: NWL) shareholders thought things couldn't get much worse, another problem has come their way.
Netwealth shares have plunged 5.72% to $17.47 in midday trade, after falling as low as $17.22 earlier in the session.
The wealth management stock has now lost more than 20% over the past month and is trading almost 50% below its 52-week high of $33.62.
And today's announcement has given investors another reason to be concerned.
So, what has happened this time?
Image source: Getty Images
Netwealth faces class action
The selling follows an ASX announcement confirming that Netwealth is facing a class action over the failed First Guardian Master Fund.
The company revealed that two of its subsidiaries have now been served with a Statement of Claim.
At the centre of the case are First Guardian investment options offered through the Netwealth Superannuation Master Fund.
These were available to adviser-led members from March 2021, before Netwealth stopped accepting new investments in December 2022.
The company says it intends to defend the claim.
According to the release, the allegations cover matters previously addressed through a court-enforceable undertaking with ASIC.
The regulator accepted that undertaking in December 2025 and began Federal Court proceedings over the same issues.
Netwealth also reminded investors that it completed a compensation program in January 2026.
That saw around $101 million paid to affected members, covering the net capital each had invested in First Guardian.
What happened to investors' money?
There was a lot of money tied up in First Guardian before things went wrong.
Between March 2021 and December 2022, 1,303 Netwealth members invested approximately $128.5 million in the fund.
Then, in May 2024, fund operator Falcon Capital froze withdrawals.
By that stage, around 1,080 members still had approximately $100.7 million invested.
The matter eventually ended up in the Federal Court.
In August, the court found that Netwealth's subsidiaries had breached the Corporations Act in how they handled the investments.
They hadn't gathered enough information about First Guardian or made adequate independent checks into the risks involved.
Members also weren't warned that they might struggle to access their money if the fund became illiquid.
ASIC didn't seek a financial penalty, pointing to Netwealth's timely compensation of affected investors.
What's next for Netwealth shares?
Netwealth has already paid around $101 million in compensation, but it still has another legal battle on its hands.
And there's still the question of what this latest case could mean financially.
With shares continuing to fall, investors clearly aren't thrilled about another round of legal proceedings.
Personally, I wouldn't rush in just because the stock has fallen so far.
