ASIC investigates four Melbourne SMSF property spruikers over alleged misleading ads

Four Melbourne businesses running seminars on investing in real estate through self-managed super funds are being investigated by ASIC over the potentially misleading nature of flyers, advertisements and online ads promoting these seminars.

The four businesses operating in the ‘sand belt’ region of the city – a law firm, a mortgage broker, a real estate agency and a firm of chartered accountants – are named in a leaked letter sent by ASIC commissioner Peter Kell to Liberal MP Peter Fletcher.

The letter was obtained by The Australian Financial Review.

Their last known seminar was held in late 2011.

It follows a review of property sales by the special SMSF taskforce established last year by ASIC chairman Greg Tanzer to examine “high-risk SMSF issues” with its first major project, being “looking at the quality of advice provided to investors”.

ASIC has yet to form an opinion as to whether the material being promoted by these four companies was unlawful.

It comes as part of an ASIC drive to improve the quality of advice provided to SMSF trustees as the sector continues to expand as does the appeal of property as an income-generating asset to hold in these funds.

A spokesperson for ASIC would not comment on the companies named in the letter, but told Property Observer it was “cracking down on the sector, including advertising”.

He said ASIC had released guidance for how investing in property through SMSFs should be advertised and expected promoters to adhere to these guidelines.

“We don’t want SMSF investors to become the targets of unscrupulous spruikers,” he said.
The guidance on advertising is contained in Regulatory Guide 234 – Advertising financial products and services (including credit): Good practice guidance.

“Advertisements for financial products and credit products should give a balanced message about the returns, features, benefits and risks associated with the product. Benefits should not be given undue prominence compared with risks,” reads the guide.

ASIC established its special SMSF taskforce in September last year.

In a speech made earlier this month ASIC commissioner Peter Kell said it had been established due to several concerning developments including “an increase in geared investment strategies and increasingly aggressive advertising for SMSFs”.

ASIC does not regulate direct property investment, except where the investment is made through an SMSF.

“In the last year we have seen a rise in SMSF advertising. Unfortunately, we’ve seen more blatant examples of misleading or deceptive advertisements. Particular problem areas we have seen include misleading or deceptive statements about SMSF fees, returns and risks,” said Kell in his speech.

Following this speech, Kell later warned that ASIC “did not want to see SMSFs become the vehicle of choice for property spruikers.

“Where we see examples of unlicensed SMSF advice, or misleading marketing, we will be taking regulatory action,” he said.

In its report on the sector released earlier this month, ASIC said it had seen “blatant examples of misleading or deceptive advertising and have taken regulatory action to stop these advertisements”.

“Particular problem areas we have seen include misleading or deceptive statements about SMSF fees; SMSF returns; and SMSF risks.

Misleading advertising of property investment through self-managed super funds can result in ASIC seeking civil penalties of up to $340,000 for an individual or $1.7 million for a body corporate, investors being compensated and orders seeking correct disclosure.

ASIC’s particular areas of focus over the next 12 months are:

• enforcement—looking at unlicensed financial advice, misleading or deceptive advertising in relation to SMSFs, and continuing to actively pursue enforcement matters in the SMSF sector;
• policy implementation—working with accountants following the Government’s announcement to remove the accountants’ exemption, consulting on SMSF issues (e.g. SMSF disclosure requirements and the costs of establishing an SMSF) and registering SMSF auditors; and
• education and disclosure—continuing our financial literacy work, updating our MoneySmart website to provide Australian consumers with useful and reliable information about all types of superannuation, including SMSFs, and examining investor attitudes to SMSFs.

In March, the Australian Taxation Office revealed it expects more than 1000 applications a week to be lodged for SMSFs in May and June this year.

This article first appeared on Property Observer.