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ASIC has commenced civil penalty proceedings against a financial services licensee in the Federal Court over allegations that its authorised representative received conflicted remuneration for advising clients to set up SMSFs to buy property.
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ASIC pursues first conflicted remuneration case
13 June 2019
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In a public statement, ASIC stated it has commenced civil penalty proceedings in the Federal Court against R M Capital Pty Ltd and its authorised representative, The SMSF Club Pty Ltd, in relation to accepting conflicted remuneration.
ASIC alleged that SMSF Club advised its clients to set up SMSFs then use their SMSF to buy real property marketed by a real estate agent, Positive RealEstate Pty Ltd.
ASIC also asserted that SMSF Club had referral agreements with Positive RealEstate and that RM Capital was aware of this referral agreement.
The corporate regulator contended that from December 2013 to July 2016, each time an SMSF Club client used their SMSF to buy a property marketed by Positive RealEstate, Positive RealEstate paid around $5,000 to SMSF Club. At times, Positive RealEstate paid these amounts directly to SMSF Club, while at others it paid them to RM Capital who passed on the majority to SMSF Club.
ASIC alleged that SMSF Club accepted more than $730,000 in conflicted remuneration from Positive RealEstate.
ASIC’s case is that the payments could reasonably be expected to have influenced financial product advice given by SMSF Club to its clients, and so constituted banned conflicted remuneration under the Corporations Act.
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It also alleged that RM Capital was aware of the payments and did not take reasonable steps to stop the SMSF Club from accepting them. ASIC contends that as the authorising licensee for SMSF Club, RM Capital’s failure to take reasonable steps to ensure SMSF Club’s compliance also breached the law.
ASIC is seeking declarations of contravention, civil penalties and compliance orders against both RM Capital and SMSF Club.
“This will be the first case concerning the alleged breach of conflicted remuneration provisions,” ASIC said.
“ASIC will contend that SMSF Club and RM Capital contravened the act on as many as 259 occasions each. Each contravention attracts a potential civil penalty of up to $1 million.”
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