ASIC issues warning on property advisors dabbling in SMSFs

Australia’s corporate regulator has issued several warnings over the self-managed superannuation fund industry, in a report which targets the property market as a particular source of trouble.

The warning comes after remarks made by Australian Securities and Investments Commission head Peter Kell, who said last week the regulator is concerned about advice being given about SMSFs which is inadequate or misleading.

In the latest report, published yesterday, ASIC says it is concerned people in the property industry are giving advice which could be misleading. It also says there are some in the property industry who believe they don’t need an Australian Financial Services license in order to give that advice.

“A real estate agent who does not specifically market to SMSFs, or carry on a business of recommending that SMSFs be used to purchase real property, is not required to obtain an AFS license,” the report says.

But it also goes on to say ASIC will be particularly targeting “property spruikers”.

Property has become a popular source of investment for SMSFs. The trend has become so popular the Government is reportedly considering taxing property gains in SMSFs in order to plug holes in the May Budget.

“Unlicensed financial advice in the SMSF sector will be a focus for ASIC in 2013 and we will be taking regulatory action against unlicensed operators,” the report states.

“In particular, we will be targeting property spruikers. We do not want to see SMSFs become the vehicle of choice for unscrupulous operators.”

Robert Larocca, a spokesperson for the Real Estate Industry of Victoria, told SmartCompany this morning the report was a timely reminder.

“This is a timely reminder to all practitioners about the importance in understanding delineations between the marketing and selling of property, and investment advice,” he says.

“It’s probably less of an issue in the broader scale of the residential property market, but if you’re engaged in that market you need to be aware of the rules.”

The report details several areas where SMSF advisors are falling short. In particular, ASIC said it has seen some “blatant examples of misleading or deceptive advertising”.

“We strongly encourage all SMSF advertisers to carefully review the content of their advertisements against our good practice guidance for advertising,” it said.

ASIC said given SMSFs are the fastest growing sector of the superannuation industry, with $439 billion in funds under management; it will take an interest in regulating “gatekeepers”. That is, those who advice, audit and provide SMSF products.

“If there are widespread losses in the SMSF sector, it is likely that investor confidence will be seriously eroded, there will be increased scrutiny of gatekeepers, and there may be calls for greater regulation of SMSFs and the advice providers that work in this sector.”