ASIC warns estate agents on SMSFs
The warning comes amid growing concern about the DIY super sector's increased investment in property, which the Reserve Bank has flagged as another avenue for housing speculation and potential instability of the financial system.
In a letter to the Real Estate Institute of Australia and its members, the Australian Securities and Investments Commission said it had become aware of a sharp rise in promoters recommending investors set up super schemes to invest in property.
Under the Corporations Act, only someone who holds a financial services licence is permitted to give this advice.
"If real estate agents are providing advice rather than factual information, they may be carrying on an unlicensed financial services business in contravention of the Corporations Act," the letter said.
"Providing financial product advice includes making a recommendation or a statement of opinion to a person to set up an SMSF or use an existing SMSF to purchase real property."
ASIC said it was aware of some agents offering commissions or benefits to financial advisers for recommending investors use the schemes to purchase the real estate agent's properties.
While it would not comment on how many cases of spruiking it was investigating, the REIA said it was aware of at least eight instances in Queensland and Western Australia.
Chief executive Amanda Lynch said she was committed to working with ASIC in making sure members were aware of their obligations.
The Reserve Bank said the strategy represented a vehicle for potentially speculative demand for property and raised concerns about consumer protection.
Helen Hodgson, an accountant and senior lecturer at the University of New South Wales' business school, said there was a worrying regulatory gap around self-managed super funds and property investment.
"If real estate agents are talking to people about investing in property through an SMSF, they can set everything up and say, 'by the way, we don't have the appropriate licence, go see an accountant'," she said. 'But the problem is that quite often that initial contact has happened at an unregulated level. Whether or not they are getting appropriate financial advice, who knows?
"There needs to be something that requires independence between a real estate agent and the person that is giving financial advice."
Frequently Asked Questions about this Article…
ASIC has warned real estate agents that it is illegal to promote self-managed super funds (SMSFs) to investors for property investment unless they hold a financial services license. This is to ensure that investors receive proper financial advice.
ASIC has warned real estate agents that it is illegal to promote self-managed super funds (SMSFs) for property investment without a financial services license. This is part of increased scrutiny on the self-managed super industry.
There is growing concern because increased investment in property through SMSFs could lead to housing speculation and potential instability in the financial system, as highlighted by the Reserve Bank.
There is concern because the Reserve Bank has flagged SMSFs' increased investment in property as a potential avenue for housing speculation and financial system instability.
Under the Corporations Act, only individuals or entities with a financial services license are permitted to provide financial advice, including recommendations to set up or use an SMSF for property investment.
Under the Corporations Act, only individuals with a financial services license are permitted to provide advice on setting up or using an SMSF for property investment.
ASIC has noted that some real estate agents are offering commissions or benefits to financial advisers for recommending SMSFs to purchase properties. This practice is under scrutiny as it may contravene regulations.
No, real estate agents cannot legally recommend setting up an SMSF for property investment unless they hold a financial services license.
While ASIC has not disclosed the number of cases, the Real Estate Institute of Australia (REIA) is aware of at least eight instances in Queensland and Western Australia.
Real estate agents providing unlicensed financial advice may be operating an unlicensed financial services business, which is a contravention of the Corporations Act.
The REIA, led by Chief Executive Amanda Lynch, is committed to working with ASIC to ensure that its members are aware of their legal obligations regarding SMSF promotions.
The Reserve Bank has raised concerns about SMSFs as a vehicle for speculative property demand, which could lead to financial instability, prompting increased scrutiny.
Unlicensed financial advice can lead to investors making uninformed decisions, potentially resulting in financial losses or legal issues. It is crucial for investors to receive advice from licensed professionals.
The Real Estate Institute of Australia is committed to working with ASIC to ensure its members are aware of their obligations regarding SMSFs and property investment.
Helen Hodgson, an accountant and lecturer, suggests that there needs to be a requirement for independence between real estate agents and those providing financial advice to ensure unbiased and regulated guidance.
There is a regulatory gap because real estate agents can discuss property investment through SMSFs without the appropriate license, leading to concerns about the adequacy of financial advice being provided.
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