The Australian Securities and Investment Commission (ASIC) yesterday announced it is working with the Real Estate Institute of Australia (REIA) to ensure real estate agents understand their legal obligations when dealing with SMSFs.
ASIC has written to the REIA, the state and territory real estate institutes and property investment associations outlining its concerns and requesting the real estate bodies pass these on to members.
“Real estate agents may not realise that they may be carrying on a business of providing financial product advice and may need an AFS licence, or authorisation under an AFS licence, when making recommendations or statements of opinion to a person to use an SMSF to invest in property,” the letter stated.
In its letter, ASIC also warned person convicted of carrying on an unlicensed financial services business may be subject to a fine of up to $34,000 or imprisonment for two years, or both.
In addition, ASIC stated it is aware 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 may be considered conflicted remuneration and financial advisers may be banned from receiving them under the Future of Financial Advice reforms, ASIC said.
Chair of Property Investment Professionals of Australia (PIPA) Ben Kingsley told SMSF Adviser this latest move from ASIC is positive for the SMSF sector.
“The next step is to get in front of the government - this is not just an issue for SMSFs, it's an issue for anyone investing in residential property,” Mr Kingsley said.
PIPA has long argued that the government should legislate for property to be classed as a financial product when the purpose of sale is for investment.
“Every review in the last 10 years has recommended regulation in property, and no government has been willing to bring it on. The Liberal party has given good indication that they are interested in having that conversation,” Mr Kingsley added.