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19-135MR ASIC uses conflicted remuneration powers against SMSF advisers
ASIC has commenced civil penalty proceedings in the Federal Court against R M Capital Pty Ltd (RM Capital) and its authorised representative, The SMSF Club Pty Ltd (SMSF Club), in relation to accepting conflicted remuneration.
ASIC alleges that SMSF Club advised its clients to set up self-managed superannuation funds (SMSFs) then use their SMSFs to buy real property marketed by a real estate agent, Positive RealEstate Pty Ltd (Positive RealEstate). ASIC asserts that SMSF Club had referral agreements with Positive RealEstate and that RM Capital was aware of this referral agreement.
ASIC contends that, from December 2013 to July 2016, each time an SMSF Club client used their SMSF to buy a property marketed by Positive RealEstate, Positive RealEstate paid around $5,000 to SMSF Club. At times, Positive RealEstate paid these amounts directly to SMSF Club, while at others it paid them to RM Capital who passed on the majority to SMSF Club.
ASIC alleges that SMSF Club accepted more than $730,000 in conflicted remuneration from Positive RealEstate.
ASIC’s case is that the payments could reasonably be expected to have influenced financial product advice given by SMSF Club to its clients, and so constituted banned conflicted remuneration under the Corporations Act.
ASIC also alleges that RM Capital was aware of the payments and did not take reasonable steps to stop the SMSF Club from accepting them. ASIC contends that as the authorising licensee for SMSF Club, RM Capital’s failure to take reasonable steps to ensure SMSF Club’s compliance also breached the law.
ASIC is seeking declarations of contravention, civil penalties and compliance orders against both RM Capital and SMSF Club.
This will be the first case concerning the alleged breach of conflicted remuneration provisions. ASIC will contend that SMSF Club and RM Capital contravened the Act on as many as 259 occasions each. Each contravention attracts a potential civil penalty of up to $1 million.
Pursuant to s963F of the Corporations Act, an Australian financial services licensee must take reasonable steps to ensure that its representatives do not accept conflicted remuneration. Conflicted remuneration is any benefit that could reasonably be expected to influence either the choice of financial product recommended by the licensee or representative or the financial product advice given by the licensee or representative to retail clients.
s963G of the Act prohibits authorised representatives of Australian financial services licensees from accepting conflicted remuneration.
The matter has been listed for a case management hearing on 27 June 2019 in the Federal Court.
Editor's note 2:
The next case management hearing is listed for 20 February 2020.
Editor's note 3:
The case management date has been moved from 20 February 2020 to 19 March 2020, in the Federal Court.
Editor's note 4:
The case management date has been moved from 19 March 2020 to 2 April 2020, in the Federal Court.
Editor's note 5:
The next case management hearing is listed for 11 June 2020.
Editor's note 6:
The next case management hearing is listed for 09 July 2020.