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Wednesday 4 November 2015

15-322MR Court orders penalty for false and misleading 'Free SMSF Setup' advertising

The Federal Court of Australia has made declarations and ordered Superannuation Warehouse Australia Pty Ltd (SWA) to pay a penalty of $25,000 for false and misleading “Free SMSF Setup” advertising. The statements were made on two websites operated by SWA, and

SWA, which provides online accounting and administration services for self-managed superannuation funds (SMSF), admitted that the statements were false and misleading.  It consented to the declarations and additional orders requiring SWA to:

  • implement a compliance program;
  • post notices on the websites about the proceeding; and
  • notify consumers who applied to SWA for the free SMSF setup service about the proceeding.

The Federal Court found that between 22 January 2014 and 8 May 2015, the "Free SMSF Setup" statement on the websites was false, misleading and deceptive because it represented that SWA would set up an SMSF at no cost when in fact:

  • SWA’s online application form for the free SMSF set up service could not be submitted without authorising SWA to be the fund administrator for which there was a fixed monthly fee;
  • SWA requested applicants to put in place a payment plan for monthly payments of administration fees when it set up the SMSF; and
  • SWA charged monthly fees for its SMSF administration services.

These matters were not clearly or prominently disclosed on the websites.

In addition, between 22 January 2014 and 5 August 2014 applications for SMSF set up with a corporate trustee required a payment of $950 to be made to SWA, without this being clearly and as prominently stated on the websites where “Free SMSF Setup” was advertised.

In the judgment, His Honour Justice Beach found that the "Free SMSF Setup" representation was false or misleading in that:

"a)      the administrator consent was required for the “Free SMSF Setup”;

b)      the administrator consent affected the costs of the “Free SMSF Setup”; and

c)      monthly fees were required to be paid to SWA for its services.

In the circumstances the setup was not 'free'.”

ASIC Deputy Chair Peter Kell welcomed the decision and said: ‘Deciding to establish a self-managed superannuation fund is a significant financial decision.  Consumers should not be misled by advertising, including online.  ASIC considers that terms such as "free" convey a strong impression to consumers and should not be used where there is any charge or cost associated with the product or service advertised.'

ASIC encourages financial services providers to regularly review their website content and consider ASIC's guidance on promoting financial products and advice services in Regulatory Guide 234 Advertising financial products and advice services including credit: Good practice guidance. (Ref: RG 234)


On 10 April 2014, ASIC issued an infringement notice to SWA in respect of the “Free SMSF Setup” advertisement on one of the websites. SWA failed to pay the penalty of $10,200 specified in the infringement notice.

Following SWA's failure to pay the infringement notice, ASIC conducted further investigations and subsequently, on 28 April 2015, ASIC issued a civil penalty proceeding in the Federal Court of Australia.

ASIC may issue an infringement notice pursuant to section 12GXA of the ASIC Act if it believes that the consumer protection provisions of the ASIC Act have been contravened.  A person who receives an infringement notice is not obliged to pay the penalty in the notice.

A copy of the judgment can be found here.