The Federal Court has ordered licensee RM Capital to pay a $575,000 penalty and its authorised representative The SMSF Club to pay a $350,000 over conflicted remuneration breaches.
The penalties follow a court finding last February that RM Capital had failed to take reasonable steps between August 2013 and August 2016 to ensure that The SMSF Club did not accept conflicted remuneration.
The court also found that that on multiple occasions between November 2014 and July 2016 that The SMSF Club accepted conflicted remuneration totalling $135,863.65 in referral fees from real estate agent Positive RealEstate for assisting The SMSF Club clients to set up an SMSF and purchase property from Positive RealEstate.
ASIC had alleged that the referral fees were paid as part of a referral agreement between The SMSF Club and Positive Real Estate which was a breach of conflicted remuneration laws.
On each occasion it accepted a referral fee, The SMSF Club breached the provision of the Corporations Act which prohibits an authorised representative from accepting conflicted remuneration.
As the licensee that authorised SMSF Club to provide financial services, RM Capital breached the law by failing to take reasonable steps to ensure The SMSF Club did not accept the payments.
In his testimony to the court, RM Capital managing director James Richardson said he did not seek legal advice about the referral agreement.
Instead, he had received internal advice from director Guy Le Page and externally from licensee compliance firm GRC Essentials, who did not suggest the arrangement constituted conflicted remuneration and that legal advice was not needed.
The court ordered RM Capital and The SMSF Club to each provide ASIC with a written report of an independent expert stating whether it has in place appropriate systems, policies and procedures to ensure that its representatives comply with the Corporations Act.
ASIC commenced civil proceedings in the Federal Court against RM Capital and SMSF Club in relation to accepting conflicted remuneration on 7 June 2019, with the court finding in favour of the regulator almost two years ago.
ASIC deputy chair Sarah Court said the court’s judgment reflects RM Capital’s “systemic failure” to uphold important consumer protection safeguards over a sustained, three-year period.
“Conflicted remuneration has the potential to cause consumers to be given financial product advice that is weighted to the provider’s interests and may not suit consumers’ needs,” Court said.
Last November, ASIC released an updated report on SMSF establishment advice and over 60 per cent of advice files included in the review failed to demonstrate compliance with the best interests duty.
