The SMSF Professionals' Association of Australia (SPAA) has responded to ASIC’s push to increase disclosure requirements for SMSF practitioners in its submission to Consultation Paper 216 (CP 216.)
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.
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