Financialplanners advising clients over the potential returns they can expect on agribusiness investment products may find themselves in breach of Policy Statement (PS)170.
Promoters of agribusiness schemes have been getting around the problem of breaching the ruling themselves by providing advisers with calculators to work out investment return forecasts.
In light of this, legal partner with Brisbane-based law firm McMahon Clarke, Langton Clarke warns advisers may find themselves inadvertently in hot water with theAustralian Securities and Investments Commission(ASIC), given the regulator has flagged its intent to closely monitor advisers and product promoters for breaches of the standard.
“In the past, one way of providing a forecast has been for the promoter to use an agribusiness expert to verify the forecast. But the expert’s report is being challenged by ASIC querying an expert signing off on areas such as inflation,” Clarke says.
The ASIC test for providing forecasts is that they must be reasonable and objective. However, according to Clarke the promoter can give the calculator to the adviser, as they are not a retail client.
Clarke, speaking at last week’s Lonsdale agribusiness conference, says a misleading set of forecasts would enable the promoter to be prosecuted under the Corporations Act, given “ASIC is more likely to look at the promoters who provide the forecasts, as a target for prosecution”.
“The responsibility might switch to the advisers if a disgruntled investor contacts ASIC. If the promoter sends the calculator to the advisers who then gives it to the client, then that will attract ASIC’s attention,” Clarke says.
Also speaking at the conference, Australian Taxation Office national business manager product rulings Gary Hammersley warned agribusiness promoters being granted product rulings will remain difficult.
Hammersley also warned the undertakings in prospectuses must happen as described or the ruling will subsequently be withdrawn.
