Following ASIC action, the Supreme Court of NSW found Park Trent Properties Group Pty Ltd (Park Trent) had been unlawfully carrying on a financial services business for over 5 years by providing advice to clients to purchase investment properties through a SMSF.

In his judgment, his Honour Acting Justice Sackville said it was in the public interest that Park Trent be restrained from carrying on a financial services business. 

ASIC launched legal proceedings in November 2014 against Park Trent who, by the time of the trial in June 2015 had advised over 860 members of the public to establish and switch funds into an SMSF (refer: 14-299MR).

In handing down his judgment, his Honour observed that Park Trent's business model depended on "persuading relatively unsophisticated investors of the virtues of using their superannuation accounts to purchase investment properties and to establish SMSFs… Investors were influenced to make important decisions concerning their superannuation strategy with little or no genuine consideration of whether the decision took proper account of their individual financial circumstances. Some suffered financial loss as a consequence."

His Honour also referred to the role of Park Trent's CEO, Ronald Cross and referred to his "willingness to ignore legal advice as to the nature of Park Trent's statutory obligations."

His Honour said that his decision "serves as a warning to others who conduct or propose to conduct businesses which seek to influence clients to establish SMSFs for investment purposes, without having the necessary licence to do so."

ASIC Deputy Chairman Peter Kell said: ‘This outcome demonstrates the courts, ASIC and the public will not tolerate this type of unscrupulous behaviour.

‘Property spruikers who recommend people invest in property via SMSFs, or facilitate such an investment, and who do not have an Australian financial services licence are breaking the law.

ASIC’s message is that anyone recommending or facilitating SMSFs as a way of investing in property will need to have a licence and provide appropriate advice that prioritises the client's interests.

‘It is important that advisers who deal with SMSFs are appropriately licenced because the important safeguards and standards that come with being licenced are in place for a sector which is of growing importance to more Australian investors.’

The parties have until 29 October 2015 to file submissions on the form of final orders.

Download the judgment

Background

ASIC established a SMSF taskforce in 2012 to focus on high-risks in this sector, including potentially inappropriate geared investment strategies, increasingly aggressive advertising for SMSFs and fraud.

Outcomes and actions include:

• cancelling the credit licence of Queensland-based Smithson & Baye as part of an ongoing investigation into a property and SMSF promoting group (refer: 15-228MR)
• Omniwealth Services pay a $10,200 penalty for potentially misleading claims on its website (refer: 15-190MR)
• The principal of Sherwin Financial Planners, Bradley Thomas Sherwin, being charged with fraud. The charges relate to the use of SMSFs of former clients of Sherwin Financial Planners (refer: 15-158MR)
• Federal Court of Australia judge Richard White ruling Gold Coast property developer Craig Gore, several other parties and financial services businesses, including Queensland-based ActiveSuper and Royale Capital, contravened sections of the Corporations Act or were knowingly concerned in those contraventions. (refer: 15-134MR)
• ASIC has commencing legal action in the Federal Court seeking financial penalties and orders against Superannuation Warehouse Australia Pty Ltd. ASIC alleges the firm, which provides online accounting and administration services for SMSFs, engaged in misleading or deceptive conduct in relation to financial services and made false or misleading representations (refer: 15-095MR)
• Australian Financial Planning Solutions Pty Ltd pay $10,200 in penalties for potentially misleading SMSF ads (refer: 15-052MR)
• Interprac Financial Planning agreeing to address ASIC concerns relating to advice provided to some clients about SMSFs (refer: 14-258MR)
• Sentry Financial Services agreeing to address ASIC concerns about SMSF advice provided to clients (refer: 14-109MR)
• SuperHelp Australia pay a $10,200 penalty after making potentially misleading statements about the cost of setting up SMSF (refer: 14-051MR)
• ASIC investigating the conduct of the founder of the Charterhill Group of Companies, George Nowak, and the activities of the Charterhill Group, which operated as a ‘one stop shop,’ providing advice to clients on the establishment of SMFS (refer: 14-024MR)
• Media Super pay $10,200 in penalties for potentially misleading SMSF ads (refer: 14-001MR)
• Spring Financial Group entering into an enforceable undertaking following ASIC concerns about the level of monitoring and supervision of its representatives (refer: 13-263MR)
• Anne Street Partners agreeing to engage an independent expert following ASIC concerns about SMSF advice provided to clients (refer: 13-248MR)

SMSFs will continue to be a focus in ASIC’s enforcement work.

Editor's note:

On 27 November 2015, the Supreme Court of NSW has handed down final orders further to the judgment delivered against Park Trent (refer: 15-358MR).