ASIC is furiously shaking its quill at real estate agents today:
ASIC has warned the real estate industry that agents recommending investors use a self-managed superannuation fund (SMSF) to invest in property must ensure they are appropriately licensed to provide the advice. ASIC is working with the Real Estate Institute of Australia (REIA) to ensure that real estate agents understand their legal obligations.
ASIC has written to the REIA, the state and territory real estate institutes and property investment associations (real estate bodies), setting out ASIC’s concerns and asking the real estate bodies to communicate these to its members.
ASIC is concerned that with the increased popularity of SMSFs and property investment, real estate agents may not realise they are providing financial product advice and need an Australian financial services (AFS) licence when making recommendations or statements of opinion to a person to use an SMSF to invest in property. If providing this advice, agents must ensure they comply with legal obligations under the Corporations Act 2001.
ASIC’s letters to the REIA and the real estate bodies warn that:
- If a person does not hold an AFS licence or is not authorised by an AFS licensee, they can only provide factual information to consumers in relation to SMSFs.
- Where an AFS licence is required, real estate agents must immediately cease offering and providing financial services or advertising the provision of financial services until such time as an AFS licence is obtained or they become a representative of an AFS licence holder.
- A person convicted of carrying on an unlicensed financial services business may be subject to a fine of up to $34,000 or imprisonment for 2 years or both. If a company is convicted it may also be liable to penalties, including a fine of up to $170,000.
ASIC Commissioner Greg Tanzer said ASIC’s role in relation to SMSFs is to regulate the gatekeepers – the advice providers, SMSF auditors, and providers of products and services to SMSFs.
‘We want to ensure the SMSF sector remains healthy and vibrant so investors can be confident that, if they are receiving advice about investing through an SMSF, their adviser holds an Australian financial services licence and is aware of its obligations’, Mr Tanzer said.
ASIC is aware some real estate agents are offering commissions or benefits to financial advisers for recommending that investors use an SMSF to purchase the real estate agents’ properties. Such commissions or benefits may be conflicted remuneration and financial advisers may be banned from receiving them under the Future of Financial Advice (FOFA) reforms. This is because the commissions or benefits could reasonably be expected to influence the financial product advice given to retail clients.
I suppose this is praiseworthy but given the wider investor boom in property it’s a bit like a finger in the dike, no?
