After revealing that was significant room for improvement in the SMSF advice sector ASIC has reacted by releasing proposed guidelines to improve quality of advice to advisers.
The company watchdog released Consultation Paper 216
Advice on self managed superannuation funds: Specific disclosure requirements and SMSF costs.
The collapse of Trio Capital, has been used in the paper as an example where the sector needed further regulation and reinforced strongly in the consultation paper that a new disclosure framework for advisers working with SMSF trustees is necessary.
ASIC has indicated that it proposes to implement changes by imposing specific disclosure obligations and requirements on those who provide advice on SMSFs, in order to assist clients in making a decision about whether to establish or switch to an SMSF thus reflecting “the advice on establishing an SMSF that advisers should already be giving to clients.”
Fundamentally, the proposals will include a new responsibility for AFS licensees and their authorised representatives to warn clients that SMSF investors are, “not entitled to receive compensation under Part 23 of the Superannuation Industry Supervision Act for a suffered loss as a result of fraud and theft”.
The Trio case highlighted that many of the aggrieved investors in Trio were uninformed of the lack of compensation available to SMSF trustees in cases of fraud or theft and as a result the consultation paper asked for feedback on whether clients should be required to sign a document, acknowledging that they understand this risk before they decide to set up or switch to an SMSF.
The SMSF Professionals’ Association of Australia (SPAA) has welcomed the paper, pledging to engage with ASIC during the consultation process.