At an address on Wed 16.7.2014 to CPA Australia’s SMSF Conference 2014, ASIC Commissioner Greg Tanzer warned of ASIC’s concern about advice being given to SMSFs to invest in property.
He said ASIC was aware there had been a sharp rise in promoters recommending that investors either set up or use an existing SMSF to invest in property. ASIC is concerned these promoters may not be complying with the law. Mr Tanzer said ASIC was concerned that, with the increased popularity of SMSFs and property investment, real estate agents and property advisers may not realise they may be carrying on a business of providing financial product advice and may need an AFS licence, or authorisation under an AFS licence, when making recommendations or statements of opinion to a person to use an SMSF to invest in property. Mr Tanzer said ASIC is now working with individual businesses suspected of engaging in unlicensed conduct to help them understand their obligations.
Although noting it was early days in the implementation of the limited AFS licence regime, Mr Tanzer said ASIC had identified some “concerning trends” from the process so far. Among other things, ASIC has found inadequate or no evidence of RG 146 training course completion for all or some of the financial products sought under the application. ASIC has also found inadequate coverage of professional indemnity insurance.
Mr Tanzer said ASIC is looking at the trend of “one-stop shop” operators offering a range of services to SMSFs. He said so far, ASIC’s project team has identified that a feature of these business models is a “one size fits all” approach where all investors who use their multiple services receive the same suite of products and services – that is, they end up with an SMSF, a property investment and a limited-recourse borrowing arrangement. The project team was also exploring whether commissions are being paid within these business models and whether these commissions are consistent with the restrictions on payment of commissions for advice under the FoFA reforms.
[LTN 136, 17/7/14]