Formal SMSF warning issued by ASIC

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ASIC has issued a formal warning to the real estate industry, saying agents recommending investors use an SMSF to invest in property must ensure they are appropriately licensed to do so.

In a letter sent to the Real Estate Institute of Australia (REIA), the regulator sets out its concerns and askes the organisation to communicate the information to its members.

ASIC’s primary concern is that, with the increased popularity of SMSFs and property investment, real estate agents may not realise they are providing financial product advice and need an AFS licence when making recommendations or statements of opinion to a person, advising them to use an SMSF to invest in property.

In its communications with the RIEA, ASIC warns that, if a person doesn’t hold an AFS licence or is not authorised by an AFS licensee, they can only provide factual information to consumers in relation to SMSFs. Furthermore, where an AFS licence is required, agents must immediately stop offering financial service or advertising the provision of financial services until they’ve obtained an AFS licence or become a representative of an AFS licence holder.

If a person is convicted of carrying-on an unlicensed financial services business, they could be penalised with a fine of up to $34,000 or up to two years’ imprisonment – or both. A company convicted of the same crime may also be liable to penalties, including a fine of up to $170,000.

 ASIC’s role in relation to SMSFs is to regulate the gatekeepers – the advice providers, SMSF auditors, and providers of products and services to SMSFs, says commissioner Greg Tanzer.

“We want to ensure the SMSF sector remains healthy and vibrant so investors can be confident that, if they are receiving advice about investing through an SMSF, their adviser holds an Australian financial services licence and is aware of its obligations,” he says.

ASIC further adds that it’s aware some real estate agents are offering commissions or benefits to financial advisers for recommending that investors use an SMSF to purchase the agents' properties.

Such commissions or benefits may be conflicted remuneration and financial advisers may be banned from receiving them under the FOFA reforms. This is because the commissions or benefits could reasonably be expected to influence the financial product advice given to retail clients.

  • Innocent Observer on 9/11/2013 3:16:34 PM

    "In its communications with the RIEA, ASIC warns that, if a person doesn’t hold an AFS licence or is not authorised by an AFS licensee, they can only provide factual information to consumers in relation to SMSFs".

    From most of the advertising stuff I've read and heard, most of the spruiking outfits do seem to keep info about SMSFs pretty "factual" It's the other stuff they tend to lie about -- property returns etc.

  • Alistair on 8/11/2013 11:11:13 AM

    Wow amazing is it not that this regulator has discovered practices in the property industry via their spruikers that we in the FP industry have been complaining about for years.
    Perhaps we should also wait for the discovery that if you put bad food in your mouth, you might get fat.
    Cop on the beat - asleep at the wheel - again!!!

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