ASIC surveillance of SMSF advice

ASIC has announced that it has accepted an enforceable undertaking (EU) from CMH Financial Group Pty Ltd (CMH) and its sole director after ASIC surveillance found CMH had failed to provide advice about self-managed superannuation funds (SMSF) that was appropriate and in the best interests of clients. This continues ASIC’s surveillance of SMSF advice.

Background: ASIC Information Sheets on SMSF advice.

Previously, in Australian Securities and Investments Commission v Park Trent Properties Group Pty Ltd (No 3) [2015] NSWSC 1527, Justice Sackville of the Supreme Court of NSW dealt with a scheme which promoted and recommended to members of the public the use of self-managed superannuation funds (SMSFs) as a means of investing in real property.

In respect of CMH, ASIC found that the SMSF advice by CMH included advice to establish SMSFs where the starting balances were below $200,000, which in ASIC’s view, taking into account the impact of CMH’s fees, was not in the best interest of clients. Furthermore, the clients were advised to engage in high-risk gearing strategies that appeared to be inappropriate given their specific circumstances and limited investment experience.

ASIC also found there was inadequate monitoring and supervision of representatives by CMH, particularly in relation to its obligation to ensure representatives are adequately trained and competent to provide SMSF advice.

ASIC was also concerned about the adequacy of risk management arrangements, adequacy of arrangements to manage conflicts of interest and procedures for ensuring the SMSF advice provided to clients did not contain false or misleading statements inducing them to deal in a financial product.

CMH has agreed to appoint an independent expert to undertake a program of pre-vet and audit reviews to test the compliance of SMSF advice prepared on behalf of CMH. The independent expert will also review CMH’s conflicts management arrangements and measures for monitoring and supervising representatives. The independent expert will report to ASIC and CMH and CMH will be required to address any deficiencies identified by the review.

Under the EU, CMH will also require all advisers providing SMSF advice to clients to complete specialist SMSF training.

Print Friendly, PDF & Email

Your Compliance Support Plan

We understand you need a cost-effective way to keep up to date with regulatory changes. Talk to us about our fixed price plans.