Real estate agents not licensed to provide financial advice could face penalties, including fines or imprisonment, if they encourage investors to use a self-managed superannuation fund (SMSF) to purchase property, the Australian Securities and Investments Commission (ASIC) has warned.
ASIC earlier this month sent a letter to Australian property industry organisations, warning their members against offering unlicensed financial advice.
“We do not want to see SMSFs become the vehicle of choice for property spruikers,” ASIC Commissioner Peter Kell said.
“Where we see examples of unlicensed SMSF advice, or misleading marketing, we will be taking regulatory action.”
Agents recommending investors use a SMSF to invest in property must ensure they are appropriately licensed to provide the advice, or risk facing fines of up to $34, 000 or two years’ imprisonment. Companies may be liable for fines of up to $170,000.
Under the Corporations Act 2001, real estate agents looking to benefit from the increased popularity of SMSFs must first acquire an Australian financial services (AFS) licence before they are able to recommend any kind of investment.
Under s766B of the Corporations Act, financial product advice is defined as a recommendation, a statement of opinion or a report of either of those things that could reasonably be regarded as being intended to influence a person's decision in relation to a financial product.
A regulatory guide is also available on ASIC’s website to help agents identify whether they are complying with their legal obligations.
ASIC has also cautioned against real estate agents offering commissions to financial advisers who encourage investors use an SMSF to purchase their properties, claiming this may count as conflicted remuneration, which financial advisers are banned from receiving under the Future of Financial Advice (FOFA) reforms.
“ASIC has ramped up its attention on a sector that is of growing importance to more Australian investors. We want to help ensure that we have a healthy SMSF sector,” Mr Kell said.
As the fastest growing superannuation sector in Australia, SMSFs currently hold $495 billion worth of assets. Some advisers have expressed concern over the impact of the industry over the property market, due to the growing housing bubble and the volatility of the investment.
“The decision to establish an SMSF is one of the most significant steps an investor can take in relation to their retirement savings… ASIC therefore wants to make sure those investors can be confident they can obtain good quality advice through gatekeepers such as accountants and financial planners,” Mr Kell added.
“At the very least, investors need to understand the time, resources, compliance obligations and risks associated with do-it-yourself superannuation, before moving their superannuation savings out of an APRA-regulated environment,” he said.
SMSFs currently hold $80 billion of their $495 billion assets in residential and commercial property.