On the 29 February, the Federal Court found that R M Capital Pty Ltd (RM Capital) failed to take reasonable steps to ensure that its authorised representative, the SMSF Club Pty Ltd (SMSF Club), did not accept conflicted remuneration.
ASIC’s case alleged that SMSF Club advised its clients to set up self-managed superannuation funds (SMSFs) to buy real property marketed by real estate agent, Positive RealEstate Pty Ltd (Positive RealEstate).
ASIC alleged that between December 2013 and July 2016 and pursuant to referral agreements, Positive RealEstate paid SMSF Club around $5,000 each time a client bought a property through them using their SMSF.
ASIC contended that SMSF Club contravened s963G of the Corporations Act by accepting payments from Positive RealEstate, and RM Capital contravened s963F of the Corporations Act by failing to take reasonable steps to ensure SMSF Club did not accept the payments.
The Court adjourned the proceeding to consider (a) relief that should ordered against RM Capital and (b) orders to be made in relation to SMSF Club.
The matter is listed for mention on 7 March 2024 at 11.15am AWST.
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Background
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.
Section 963G of the Act prohibits authorised representatives of Australian financial services licensees from accepting conflicted remuneration.
ASIC’s Report 575 SMSFs: Improving the quality of advice and member experiences (REP 575) identifies the conflict of interest concerns when purchasing a property via an SMSF.
ASIC’s Regulatory Guide 246 Conflicted and other banned remuneration (RG 246) sets out our guidance on complying with the conflicted and other banned remuneration provisions and how we will administer them.
The conflicted and other banned remuneration provisions in Divs 4 and 5 of Pt 7.7A of the Corporations Act apply to financial product advice given to retail clients and certain benefits given in relation to life risk insurance products.
ASIC’s Moneysmart website has information for consumers about financial advice, including choosing a financial adviser, understanding if a SMSF is right for you and SMSFS and property.
Editor's Note 1:
The mention listed for 7 March 2024 at 11:15am AWST has been adjourned to 25 March 2024 at 10:15am AWST.
Editor's Note 2:
The matter is listed for a one-day hearing on 12 December 2024 on all questions as to any penalty and other relief against RM Capital.