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) for property investment without a financial services license. This is part of increased scrutiny on the self-managed super industry.
ASIC has warned real estate agents that it is illegal to promote self-managed super funds (SMSFs) for property investment unless they hold a financial services licence. This is to ensure that investors receive proper financial advice.
There is concern because the Reserve Bank has flagged SMSFs investing in property as a potential avenue for housing speculation, which could lead to financial instability.
The scrutiny has increased due to concerns about the growing trend of SMSFs investing in property, which could lead to housing speculation and potential financial instability, as noted by the Reserve Bank.
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.
No, real estate agents cannot legally advise on setting up an SMSF for property investment unless they have a financial services licence. Providing such advice without a licence is against the Corporations Act.
No, real estate agents cannot legally recommend setting up an SMSF for property investment unless they hold a financial services license. Doing so would be considered unlicensed financial services business.
Using an SMSF to invest in property can lead to speculative demand and financial instability. There is also a risk of not receiving appropriate financial advice if the advice comes from unlicensed individuals.
Real estate agents promoting SMSFs without a license may be in violation of the Corporations Act, which could lead to legal action and penalties.
ASIC is working with the Real Estate Institute of Australia to ensure members are aware of their obligations and to prevent unlicensed financial advice. They are also investigating instances of such practices.
The Real Estate Institute of Australia is aware of at least eight instances of this occurring in Queensland and Western Australia.
The Real Estate Institute of Australia is aware of at least eight instances of this issue occurring in Queensland and Western Australia, indicating it is a notable concern.
Some real estate agents have been offering commissions or benefits to financial advisers for recommending SMSFs to purchase properties, which raises concerns about the independence of financial advice.
Investors should ensure that any advice they receive about SMSFs comes from a licensed financial adviser. If approached by a real estate agent, they should verify the agent's credentials and seek independent financial advice.
There are concerns about a regulatory gap and whether consumers are receiving appropriate financial advice when investing in property through SMSFs, as initial contact often happens at an unregulated level.
Independence is necessary to ensure that investors receive unbiased and appropriate financial advice. Without it, there is a risk of conflicts of interest and inadequate consumer protection.
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