ASIC has accepted an enforceable undertaking (EU) from Sydney-based CMH Financial Group Pty Ltd (CMH) and the sole director, Daniel White, after an 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.

ASIC's surveillance identified examples where financial product advice to clients about SMSFs did not demonstrate that the advice provider had acted in the best interests of the client and did not comply with product replacement advice disclosure obligations.

ASIC found that the SMSF advice 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.

In response to ASIC's concerns, 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.

ASIC Deputy Chairman Peter Kell said, 'Advice providers need to ensure their processes and documentation demonstrates that they have acted in the best interests of their clients. Setting up an SMSF is a significant financial step for consumers and many factors can impact their decision. It is therefore important that consumers receive quality, compliant advice that will assist them in making informed decisions about their retirement savings'.

Download the enforceable undertaking

Background

CMH is a Sydney-based Australian financial services licensee that offers integrated financial planning services. ASIC commenced a surveillance on CMH in 2014, as part of its regular monitoring activities, that included a review of a number SMSF client files. This review identified a number of deficiencies with the advice provided on behalf of CMH to SMSF clients.  

ASIC acknowledges CMH's cooperation throughout the process.

In July 2015, ASIC released two information sheets aimed at improving the quality of advice provided by advisers on SMSFs. The information sheets are Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205) and Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206) (refer 15-192MR).

SMSF's continue to be a strong focus of ASIC's enforcement work. Recent actions in the SMSF space include:

• Ms Sarah Jane Busteed was charged with three counts of dishonestly obtaining a financial advantage by deception and one count of dealing with over $100,000 that was the proceeds of crime (refer: 16-040MR)
• Superannuation Warehouse Australia Pty Ltd was ordered to pay a penalty of $25,000 for false and misleading“Free SMSF Setup” advertising (refer: 15-332MR)
• The Supreme Court of NSW found Park Trent Properties Group Pty Ltd had been unlawfully carrying on a financial services business for over five years by providing advice to clients to purchase investment properties through a SMSF (refer: 15-300MR)
• Dixon Advisory Group Limited complied with two ASIC infringement notices, paying two $10,200 penalties after including potentially misleading claims on its website (refer: 15-207MR)
• The credit licence of Queensland-based Smithson & Baye was cancelled following an investigation into a property and SMSF promoting group (refer: 15-228MR)
• ASIC released two information sheets to improve the quality of advice provided by advisers on  SMSFs: Information Sheet 205Advice on self-managed superannuation funds: Disclosure of risks (INFO 205) and Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206)
• Omniwealth Services paid a $10,200 penalty for potentially misleading claims on its website (refer: 15-190MR);
• The principal of Sherwin Financial Planners, Bradley Thomas Sherwin, was charged with fraud. The charges relate to the use of SMSFs of former clients of Sherwin Financial Planners (refer: 15-158MR);
• The Federal Court of Australia ruled that Craig Gore and 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);
• Australian Financial Planning Solutions Pty Ltd paid $10,200 in penalties for potentially misleading SMSF ads (refer: 15-052MR);
• ASIC banned the founder of the Charterhill Group of Companies, George Nowak, from providing financial services until 3 July 2017 on the basis that Mr Nowak is an undischarged bankrupt (refer: 15-048MR);
• Interprac Financial Planning agreed to address ASIC concerns relating to advice provided to some clients about SMSFs (refer: 14-258MR);
• Sentry Financial Services agreed to address ASIC concerns about SMSF advice provided to clients (refer: 14-109MR);
• SuperHelp Australia paid a $10,200 penalty after making potentially misleading statements about the cost of setting up SMSF (refer: 14-051MR);
• Media Super paid $10,200 in penalties for potentially misleading SMSF ads (refer: 14-001MR);
• Spring Financial Group entered into an enforceable undertaking following ASIC concerns about the level of monitoring and supervision of its representatives (refer: 13-263MR); and
• Anne Street Partners agreed to engage an independent expert following ASIC concerns about SMSF advice provided to clients(refer: 13-248MR); and
• publishing Report 337 Improving the quality of advice given to SMSF investors. (refer: 13-081MR).