Australian Greens senator Peter Whish-Wilson (Images: TS)

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.

From left: ASIC commissioner John Price, deputy chair Karen Chester and chair James Shipton

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.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
3 comments on “ASIC powerless over property spruikers”
  1. Avatar Daryl La' Brooy

    It’s not so simple. Under the Federal constitution the States have the power to regulate the property market. So for ASIC to be able to regulate, the states would have to cede this right to the Commonwealth, like they did in terms of tax collection back in the 1940’s. With State governments reliant on property revenue (stamp duty, land tax, etc.), they don’t want to see the property bubble bursting any time soon. So in my opinion it’s unlikely that ASIC will be able to regulate..

  2. Avatar Tony Gillett

    The solution to this problem is clear, if not simple. The problem is that for the last 40 – 50 years, the provision of advice has been regulated under the Corps Act through regulation of the sale of “Product” – investment product which is defined as a “security” under the Act. Direct real estate is not classified as a “security”, so it falls outside the control of the Corps Act. The solution is to revisit the Corporation Act and insert a definition of ADVICE – then empower ASIC (through a change to the Corps Act) to regulate the provision of ADVICE. In today’s “advice in the client’s best interest” world, we are often required to provide advice which does not mention or include a product recommendation – but the regulation of advice is still based around the sale of an investment product, defined as a security. It would be silly to try to define real eastate as a security – so let’s get the Act changed/updated so that ASIC can regulate the giving of ADVICE. Once you understand the problem, the solution is straightforward. But is there the political will or nous to solve the problem through inserting a definition of ADVICE in the act and repealing that part of the Corps Act which continues with the regulation of advice under a 1960’s form of regulation to a 2020’s problem?

  3. If real estate / property is bought as an investment then it should be classified as a financial product – and then the regulators can get involved!

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