The Australian Securities and Investments Commission (ASIC) yesterday released Consultation Paper 216 Advice on self-managed superannuation funds: Specific disclosure requirements and SMSF costs, aimed at providing guidance to “improve the quality of advice given to investors”.
Referencing cases such as the collapse of Trio, the consultation paper proposes further regulation of the sector and, in particular, a new disclosure framework for advisers working with SMSF trustees.
“Given the significance of the decision to establish an SMSF, and the growth of this sector, we think there is a need to improve the quality of advice given to clients when establishing or switching to an SMSF,” the report states.
“We propose to do this by imposing specific disclosure obligations on those who provide advice on SMSFs, to assist clients in making a decision about whether to establish or switch to an SMSF.
“These disclosures largely reflect the advice on establishing an SMSF that advisers should already be giving to clients.”
Specifically, the proposals include a new requirement for “AFS licensees and their authorised representatives to warn clients that SMSF investors are not entitled to receive compensation under Part 23 of the [Superannuation Industry Supervision] Act for a suffered loss as a result of fraud and theft”.
According to the report, many of the aggrieved investors in Trio were unaware of the lack of compensation available to SMSF trustees in cases of fraud or theft.
As a result of this case, the consultation paper asks for feedback on “whether clients should be required to sign a document, acknowledging that they understand this risk before they decide to set up or switch to an SMSF”.
In addition, ASIC proposes a disclosure requirement whereby advisers to SMSF trustees are required to explain “certain matters that may influence a client’s decision to set up an SMSF”, including ensuring awareness with the risks associated with SMSF establishment, developing an appropriate investment strategy and costs associated with SMSF trusteeship.
The SMSF Professionals’ Association of Australia (SPAA) welcomed the consultation paper, pledging to engage with ASIC during the consultation process.
“The announcement by ASIC today is consistent with SPAA’s objective as the peak body for the SMSF sector in Australia,” said SPAA chief executive Andrea Slattery.
“SPAA is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.”
