ASIC ‘working’ with spruiking agents

14 April 2015

Some real estate agents and others simply don't understand that they need to hold and Australian Financial Services License (AFSL) to provide advice relating Self Managed Superannuation Fund (SMSF) investments, according to the Australian Securities and Investments Commission. (ASIC).

In an answer to question on notice from a Parliamentary Joint Committee, ASIC confirmed that it had been working with state and territory real estate industry bodies to help them understand the issue, as well as those the regulator "suspect of engaging in unlicensed conduct" to help them meet their obligations.

"ASIC notes that some industry sectors do not fully understand that they need a licence to recommend that a client establish an SMSF or use an existing one to invest in property," the ASIC response said. "ASIC has worked with the state and territory real estate bodies and the Real Estate Institute of Australia to help educate the real estate industry about this."

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"We are now working with individual businesses whom we suspect of engaging in unlicensed conduct to help them understand their obligations."

The ASIC parliamentary answer said that providing financial product advice included making a recommendation or a statement of opinion to a person to set up an SMSF or use an existing SMSF to purchase property through that SMSF.

"This is because the vehicle through which the underlying investment is made is an SMSF, and an interest in an SMSF is a financial product. That is, a person who makes such a recommendation or statement of opinion provides financial product advice even where the underlying investment — property, in this case — is not a financial product."

"ASIC is concerned that, with the increased popularity of SMSFs and property investment, real estate agents and property advisers may not realise that 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.




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This is good, but the representative bodies of the financial planning industry should have been more strident about keeping real estate agents out of financial planning.

Let's get this straight. If property in SMSF is product advice, then any fees/commissions received for recommending (or even not recommending eg. nil advice) is conflicted remuneration. Financial Planners who receive these are breaching FOFA and those who are not licenced (eg. real estate agents) are giving unlicenced advice in addition to breaching FOFA. Are ASIC going to enforce this properly or just give it lip service? If they are going to enforce it, they should not underestimate the resources required or the vested interests who will fight them. If just lip service, then why bother.

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