ASIC initiates ground-breaking conflicted remuneration case
The Australian Securities and Investments Commission (ASIC) has broken new legal ground by alleging breach of the conflicted remuneration provisions of the Corporations Act by a firm which advised clients to set up self-managed superannuation funds to buy real estate marketed by a particular agent.
ASIC said it had commenced civil penalty proceedings in the Federal Court against R M Capital Pty Ltd and its authorised representative, The SMSF Club Pty Ltd, in relation to accepting conflicted remuneration.
The regulator said it was alleging that SMSF Club advised its clients to set up SMSFs then use their SMSFs to buy real property marketed by a real estate agent, Positive RealEstate Pty Ltd.
It said it would be alleged that SMSF Club had referral agreements with Positive RealEstate and that RM Capital was aware of this referral agreement.
“ASIC contends that, from December 2013 to July 2016, each time an SMSF Club client used their SMSF to buy a property marketed by Positive RealEstate, Positive RealEstate paid around $5,000 to SMSF Club. At times, Positive RealEstate paid these amounts directly to SMSF Club, while at others it paid them to RM Capital who passed on the majority to SMSF Club,” the ASIC statement said.
“ASIC alleges that SMSF Club accepted more than $730,000 in conflicted remuneration from Positive RealEstate.”
ASIC said that its case was that the payments could reasonably be expected to have influenced financial product advice given by SMSF Club to its clients, and so constituted banned conflicted remuneration under the Corporations Act.
ASIC also alleges that RM Capital was aware of the payments and did not take reasonable steps to stop the SMSF Club from accepting them. ASIC contends that as the authorising licensee for SMSF Club, RM Capital’s failure to take reasonable steps to ensure SMSF Club’s compliance also breached the law.
ASIC is seeking declarations of contravention, civil penalties and compliance orders against both RM Capital and SMSF Club.
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