Editor: ASIC has recently had two wins for different reasons, against companies inappropriately providing services to SMSF’s and their trustees.
Property spruiker found to have provided unlawful advice
Following ASIC action, the Supreme Court of NSW found that Park Trent Properties Group Pty Ltd (Park Trent) had been unlawfully carrying on a financial services business for over 5 years by providing advice to clients to borrow and then purchase investment properties through a SMSF.
ASIC launched legal proceedings in November 2014 against Park Trent which, by the time the trial in June 2015, had advised over 860 members of the public to establish and switch funds into an SMSF.
In handing down his judgement, his Honour Acting Justice Sackville said that his decision “serves as a warning to others who propose to conduct businesses which seek to influence clients to establish SMSFs for investment purposes, without having the necessary license to do so.”
ASIC Deputy Chairman Peter Kell said: “Property spruikers who recommend people invest in property via SMSFs, or facilitate such an investment, and who do not have an Australian financial services licence are breaking the law.
Anyone recommending or facilitating SMSFs as a way of investing In property will need to have a licence and provide appropriate advice that prioritises the clients’ interests. “
“It is important that advisers who deal with SMSFs are appropriately licenced because the important safeguards and standards that come with being licensed are in place for a sector which is of growing importance to more Australian investors.”
Ref: ASIC media release 15-300MR, 20 October 2015
Court orders penalty for false and misleading ‘Free SMSF Setup’ advertising
The Federal Court of Australia has made declarations and ordered Superannuation Warehouse Australia Pty Ltd (SWA) to pay a penalty of $25, 000 for false and misleading “Free SMSF Setup” advertising on two websites.
The Federal Court found that, between 22 January 2014 and 8 May 2015, the “Free SMSF Setup” statement on the website was false and misleading and deceptive because it was represented that SWA would set up and SMSF at no cost when in fact:
- SWA’s online application form for the free SMSF set up service could not be submitted without authorising SWA to be the fund administrator for which there was a fixed monthly fee;
- SWA requested applicants to put in place a payment plan for monthly payments of administration fees when it set up the SMSF; and
- SWA charged monthly fees for its SMSF administration services.
These matters were not clearly or prominently disclosed on the websites.
In addition, between 22 January 2014 and 5 August 2014, applications for SMSF set up with a corporate trustee required a payment of $950 to be made to SWA, without this being clearly and as prominently stated on the websites where “Free SMSF Setup” was advertised.
Therefore, in the circumstances the setup was not ‘free’”.
ASIC Deputy Chair Peter Kell welcomed the decision and said “Deciding to establish a self-managed superannuation fund is a significant financial decision. Consumers should not be misled by advertising, including online. ASIC considers that terms such as “free” convey a strong impression to consumers and should not be used where there is any charge cost associated with the product or service advertised.”
ASIC encourages financial services providers to regularly review their website content and consider ASIC’s guidance on promoting financial products and advice services in Regulatory Guide (RG) 234 Advertising financial products and advice services including credit: Good practice guidance.
Ref: ASIC media release 15-322MR, 4 November 2015
NTAA, ‘The Tax advisers’ Voice’ Edition No.254
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