Peter Kell is a Commissioner at the Australian Securities and Investments Commission (ASIC). On 10 April, 2013, he spoke at the CPA Australia SMSF conference.
In September last year, he became one of two ASIC Commissioners responsible for heading up ASIC’s SMSF taskforce, so when he speaks on SMSFs, it worth listening.
He focussed on three key things:
- the critically important role of gatekeepers in the SMSF sector, including the new, limited licence for accountants and the registration of SMSF auditors
- ASIC’s focus on SMSFs and the recent review of the quality of advice provided to SMSF investors
- working together to ensure that the SMSF sector remains healthy, vibrant and safe for investors.
His speech is here, and some short extracts follow.
"ASIC’s primary role in relation to SMSFs is to regulate the gatekeepers – the accountants, financial planners, SMSF auditors and providers of products and services to SMSFs. Secondly, ASIC also regulates many (but not all) of
the financial products that SMSFs commonly invest in. From that perspective, we are very keen to ensure that SMSF trustees are adequately equipped to make good investment decisions by being fully informed about the risks and returns."
"Currently, reg 7.1.29A of the Corporations Regulations 2001 permits accountants to provide advice on the establishment of SMSFs without the need for an AFS licence. This exemption will cease on 1 July 2016, and from that date all accountants who wish to give advice on SMSFs will need to be licensed."
"As part of the Stronger Super reform initiatives, ASIC became the registration body for approved SMSF auditors from 31 January 2013. This reform recognises the key gatekeeper role that approved SMSF auditors play... Since the introduction of the SMSF registration regime, ASIC has received 2,934 applications and we have registered and approved 1,178 SMSF auditors."
"We were also concerned by several developments, including an increase in geared investment strategies and increasingly aggressive advertising for SMSFs. Finally, we have seen an increase in the targeting of SMSFs by less scrupulous operators, and we are keen to address this risk."
"Through our file reviews, we found that there is room for significant improvement in aspects of the SMSF advice giving process. Where we found problems with the advice it tended to be in the following areas:
- the advice was not sufficiently tailored
- replacement product disclosure was absent orinadequate
- insurance recommendations were absent or inadequate
- an inappropriate single asset class was provided to investors
- suitable alternatives to an SMSF were not considered
- there was inadequate consideration of the investor’s long-term retirement planning objectives.
Notably, we also found that investors were not warned about the very real risk of not having access to a statutory compensation scheme in the event of theft or fraud."
"Let me be very clear – a person requires an AFS licence if they recommend that an existing or proposed member of an SMSF purchase a property through their SMSF. This is because the vehicle through which the underlying investment is made is an SMSF and an interest in an SMSF is a financial product. It does not matter for licensing purposes that the underlying investment (real property in this case) is not a financial product. In the past year, we have seen an increase in the number of advertisements pushing property purchases through SMSFs. We do not want to see SMSFs become the vehicle of choice for property spruikers. Where we see examples of unlicensed SMSF advice we will be taking regulatory action."
In addition, on 18 April, ASIC released its report, "SMSFs: Improving the quality of advice given to investors", with link here. Mandatory reading for anyone involved in SMSF advice and management.