ASIC powerless over property spruikers

ASIC Commissioner John Price has clarified the regulator’s role in curbing property investment spruikers by pointing out that real estate is not within its jurisdiction, and the people making money off the practice are not licensed financial planners.

In an exchange that highlighted the lack of direct regulatory accountability over the unlicensed property investment advice industry, Price was asked by Australian Greens senator Peter Whish-Wilson at a parliamentary joint committee hearing whether ASIC was analysing “the practice of so-called property investment advisers taking commissions”.

“The thing about direct property investment is typically it’s not regulated by ASIC,” Price responded.

The commissioner noted that property investment advice comes under the purview of state governments. When pressed by the senator if ASIC could periodically report on the issue of people being pushed into real estate purchases by property investment advisers, Price hinted that the regulator’s lack of authority over the real estate industry may be a source of frustration.

“The difficulty would be that typically, in preparing a robust report, we’d issue some of our compulsory powers,” Price responded. “To issue our compulsory powers we’d need to have jurisdiction, [but] our jurisdiction is sort of limited to financial services rather than the property world,” he explained.

Property investment advisers are broadly self-regulated. State governments and relevant real estate associations have an overview, while the Australian Competition and Consumer Commission is the designated champion of the consumer. Yet there is no direct accountability for the industry that would equate to ASIC’s regulation of advisers.

There are exceptions to the demarcation of powers that limits the regulator from policing real estate, Price noted. Property trusts or property held within an SMSF could come under ASIC’s regulatory remit, he explained, as would a situation whereby someone is comparing the worth of property to equities. “That might be financial advice because you’ve touched on shares,” he noted.

When ASIC head of wealth management, Joanna Bird, highlighted that financial advisers receiving a commission that influenced their advice “might end up in court”, Commissioner Price stepped in to draw a clear line between property investment advisers and licensed financial advisers.

“I hasten to add that the people carrying out this sort of activity are not actually financial advisers,” he interjected.

Whish-Wilson acknowledged the distinction, but lamented the revelation that ASIC’s hands were tied in the area. “There’s a bit of a theme here that the real estate market in this country is not really regulated,” he stated.

Commissioner Price was joined at the hearing by a full suite of his fellow ASIC commissioners, as well as chair James Shipton and deputy chairs Karen Chester and Daniel Crennan. Opposite sat a panel chaired by Liberal senator James Paterson, who struggled at times to contain partisan bickering between Labor senator Deborah O’Neill and Liberal MP Jason Falinski.