HELD LAWYERS

Est.1991

Property & Commercial Law

Law Matters

January 2014 Newsletter

Welcome
We hope you have returned to work fresh and invigorated from a great summer break!
Welcome back to our firms monthly newsletter, Law Matters.
In this months bulletin, we focus on: the current state of play for Future of Financial Advice
Reforms (FOFAA); estate agents and SMSFs.
If there are topics you would like us to look into, please let us know.
Each bulletin touches on a broad range of topics in an easy to read, practical way. We aim to
give you a brief, but better understanding of current issues as they arise, and food for thought!
We are happy to visit you in 2014 and provide staff or client briefings about a range of topics or matters of interest
to you. Please feel free to contact us in that regard.
We hope to see you (again) soon in person.
Adam Held
Principal

ASIC warns real estate industry about

recommending property investment through
SMSFs
ASIC is aware that there has been a sharp rise in
promoters recommending investors either set up or use
an existing self-managed superannuation fund (SMSF)
to invest in real property. These promoters may not
be complying with the law. ASIC has warned the real
estate industry that agents recommending investors
use a SMSF to invest in property must ensure they
are appropriately licensed to provide the advice. ASIC
is working with the Real Estate Institute of Australia
(REIA) to ensure that real estate agents understand
their legal obligations.
ASIC is concerned that with the increased popularity
of SMSFs and property investment, real estate agents
may not realise they are providing financial product
advice and need an Australian financial services

(AFS) licence when making recommendations or

statements of opinion to a person to use an SMSF to
invest in property. If providing this advice, agents must
ensure they comply with legal obligations under the
Corporations Act 2001 (Cth).
Section 911A of the Corporations Act 2001 requires
any person carrying on a financial services business in
Australia to hold an AFS licence or be a representative
of an AFS licensee.
A person provides a financial service if they
provide financial product advice. Under s766B of
the Corporations Act 2001, financial product advice is
defined as a recommendation, a statement of opinion
or a report of either of those things that is, or could
reasonably be regarded as being, intended to influence
a persons decision in relation to a financial product.
Providing financial product advice includes
making a recommendation or a statement of

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opinion to a person to set up an SMSF or use an

existing SMSF to purchase real property through
that 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. That is, a
person who makes such a recommendation or statement
of opinion provides financial product advice even where
the underlying investment (i.e. real property in this case)
is not a financial product.
ASIC has written to the REIA, the state and territory real
estate institutes and property investment associations
(real estate bodies), setting out ASICs concerns and
asking the real estate bodies to communicate these to
its members and warn that:
if a person does not hold an AFS licence or is
not authorised by an AFS licensee, they can only
provide factual information to consumers in relation to
SMSFs. If real estate agents are providing advice rather
than factual information, they may be carrying on an
unlicensed financial services business in contravention
of the Corporations Act.
where an AFS licence is required, real estate agents
must immediately cease offering and providing financial
services or advertising the provision of financial services
until such time as an AFS licence is obtained or they
become a representative of an AFS licence holder.
a person convicted of carrying on an unlicensed
financial services business may be subject to a fine of
up to $34,000 or imprisonment for 2 years or both. If a
company is convicted it may also be liable to penalties,
including a fine of up to $170,000.
ASIC Commissioner Greg Tanzer said ASICs role in
relation to SMSFs is to regulate the gatekeepers the
advice providers, SMSF auditors, and providers of
products and services to SMSFs.
We want to ensure the SMSF sector remains healthy
and vibrant so investors can be confident that, if they are
receiving advice about investing through an SMSF, their
adviser holds an Australian financial services licence and
is aware of its obligations, Mr Tanzer said.
ASIC is also aware that some real estate agents are
offering commissions or benefits to financial advisers for
recommending that investors use an SMSF to purchase
the real estate agents properties. Such commissions
or benefits may be conflicted remuneration and financial
advisers may be banned from receiving them under
the Future of Financial Advice (FOFA) reforms. This is
because the commissions or benefits could reasonably
be expected to influence the financial product advice
given to retail clients.
(source, in part: ASIC website, 13-304MR)

Future of Financial Advice (FOFA) reforms update

In previous Newsletters we discussed the FOFA
Reforms. The new federal Coalition government has
released exposure draft legislation and regulations for
consultation by 19 February 2014.
Some of the proposed legislative amendments include:
opt-out system ongoing fee arrangements
continue unless terminated by either client or adviser
(cf. previously proposed opt-in for clients to renew their
ongoing fee arrangement with their adviser every two
years).
no annual fee disclosure - removes the requirement
for advisers to provide an annual fee disclosure statement
to clients in ongoing fee arrangements entered into prior
to 1 July 2013.
no best interests duty catch-all - remove the
catch-all provision from the list of steps an advice
provider takes to satisfy the best interests obligation,
so that advisers can be certain they have satisfied their
obligations.
scaled advice - amend the best interests duty to
allow for the provision of scaled advice, where clients
and advisers can explicitly agree on the subject matter
of advice.
conflicted remuneration exemptions general
advice; certain life risk insurance offerings inside
superannuation; certain training and education.

Referrals
Should you require non-legal assistance with various
matters, we are happy to provide you with contact details
for a range of service providers, including financial
institutions, accountants, real estate agents, brokers, etc.

Areas of practice
Property Law including conveyancing and leasing
Commercial and Business Law
Banking and Finance Law including mortgages
and guarantees
Wills and Estates Law
Intellectual and Industrial Property Law
Litigation
If you would like further details or assistance or to
discuss information contained in this publication or
generally, please do not hesitate to contact us. For
copies of this and other publications, visit our website at
www.heldlawyers.com.

Disclaimer
This publication is intended to provide commentary and general information only. It should not be relied upon as legal advice. It is not intended to be a complete
or definitive statement of the law on the subject matter covered. Further professional advice should be sought before any action is taken in relation to the matters
described in this publication. Persons listed may not be admitted in all jurisdictions.
Liability limited by a scheme approved under Professional Standards Legislation

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