ASIC’s recommendation that advisers must provide a warning that SMSFs are not entitled to compensation under Part 23 of the SIS Act is “too simplistic,” according to a SPAA announcement.
“This approach ignores the complex nature of compensation for funds affected by fraud or theft. APRA-regulated funds are not guaranteed compensation under the SIS Act for fraud or theft and the fact that SMSFs do have other avenues for seeking compensation for theft or fraud has been ignored,” SPAA stated.
In its announcement, SPAA stated it also drew ASIC’s attention to the “uncertain nature” of Part 23 of the SIS Act for APRA-regulated funds.
“The proposed disclosure perpetuates the common misconception that APRA-regulated funds will definitely receive compensation if the fund is a victim of fraud or theft,” SPAA stated.
“Instead, we believe any warning that SMSFs are not entitled to Part 23 compensation should be made in the broader context of advisers discussing all compensation arrangements available to SMSFs.”
SPAA stated that its submission supported other SMSF risk disclosures suggested by ASIC, but warned that these risks are dependent upon individual circumstances.
However, chief executive Andrea Slattery said SPAA overall welcomes ASIC’s objective to “improve the standard of advice given to prospective SMSF trustees”.
“We believe the general impetus to improve disclosure in order to reduce risks for consumers is merited and will strengthen the integrity of the SMSF sector,” she said.
Well done to SPAA for highlighting this strange obsession of ASIC’s that this highly conditional chance of getting compensation which causes other APRA fund members to suffer an ongoing levy to pay for other people’s investment mistakes is some great advantage of APRA funds. It is also troubling that even on ASIC authored public information they do not detail that the compensation is only available at the ministers discretion and that it comes at a cost. People are left with a very misleading impression that the entitlement to compensation is absolute. Why is ASIC being so cute with the facts? Have they been intellectually “captured” by the APRA funds?
Once again, over regulation. The vast majority of SMSF’s would not even be aware that compensation is available to the larger funds let alone them. Telling them something they already assume will open the discussion with the SMSF asking why are they not covered, why should a large fund that has been subject to fraud get cover when a SMSF subject to the same fraud gets nothing? Who wants to answer that question?