The Australian Securities and Investments Commission (ASIC) has advocated both prohibiting limited recourse borrowing arrangements (LRBAs) and/or mandating a minimum balance for self-managed superannuation funds (SMSFs) as a means of better protecting consumers.
Answering a question on notice from the Parliamentary Joint Committee on Corporations and Financial Services, ASIC listed what it regarded as possible policy solutions which would help prevent consumers being advised to inappropriately establish an SMSF.
It listed member education, better financial advice, the requirements for setting up an SMSF and better compliance and oversight.
On the question of requirements for setting up an SMSF it said, “consideration could be given to prohibiting limited recourse borrowing arrangements (LRBAs) and/or mandating a minimum SMSF balance”.
“We note the Council of Financial Regulators is currently considering LRBAs and is due to report to Government by the end of this year,” the ASIC answer said.
It suggested that consideration could also be given to extending the proposed design and distribution obligations regime to the establishment of SMSFs.
“This could involve imposing an obligation on SMSF promotors to consider the type of consumer whose needs would be addressed by establishing the SMSF and the channel best suited to distributing the SMSF as a product class.”
Dealing with financial advice, ASIC suggested that the new training and education standards to be set by the Financial Adviser Standards and Ethics Authority (FASEA) should improve the quality of financial advice provided to Australian consumers.
“ASIC has suggested that it might be appropriate to require specialist training for persons providing advice to set up an SMSF,” it said.