Advisers to face court over conflicted remuneration

Advisers to face court over conflicted remuneration

The corporate regulator has begun civil penalty proceedings in the Federal Court against a licensee in relation to accepting more than $730,000 in conflicted remuneration.

The proceedings are against RM Capital and its authorised representative the SMSF Club, ASIC said in a statement.

ASIC contended that SMSF Club and RM Capital contravened the Corporations Act on as many as 259 occasions each, with each contravention attracting a potential civil penalty of up to $1 million. It is the first case concerning the alleged breach of conflicted remuneration provisions.

ASIC alleged that SMSF Club advised its clients to set up self-managed superannuation funds (SMSF), then use their SMSFs to buy real property marketed by a real estate agent, Positive RealEstate.

It also said that SMSF Club had referral agreements with Positive RealEstate and that RM Capital was aware of this referral agreement.

Further, ASIC alleged that SMSF Club accepted more than $730,000 in conflicted remuneration from Positive RealEstate.

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ASIC said its 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.

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 and that, as the authorising licensee for the SMSF Club, RM Capital’s failure to take reasonable steps to ensure SMSF Club’s compliance also breached the law.

“ASIC contends 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,” it said.

“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 said it is seeking declarations of contravention, civil penalties and compliance orders against both RM Capital and SMSF Club.

Adrian Flores

Adrian Flores

Adrian Flores is a features editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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