The first case regarding an alleged breach of conflicted remunerations is being heard in the Federal Court.
Reflecting the new regulatory climate post-Royal Commission, ASIC commenced civil penalty proceedings against RM Capital and its authorised representative, the SMSF Club.
Explaining the proceedings, ASIC explained that the SMSF Club advised clients to set up SMSFS and use them to buy property marketed by Positive RealEstate, with which ASIC alleged the SMSF Club had a referral arrangement. Furthermore, ASIC believes RM Capital was aware of this arrangement.
During the period between December 2013 and July 2016, ASIC said the SMSF Club accepted over $730,000 in conflicted remuneration from Positive RealEstate.
The remuneration is considered conflicted, ASIC explained, because “payments could reasonably be expected to have influenced financial product advice given by SMSF Club to its clients, and so constituted banned conflicted remuneration under the Corporations Act.”
According to ASIC, these contraventions occured “on as many as 259 occasions each,” with each contravention potentially attracting a civil penalty of up to $1 million.
All of this suggests ASIC is gearing up to take more cases regarding conflicted remuneration to court, with licensees expected to pay hefty fines in the process.
This reflects Kenneth Hayne’s comments in the final Royal Commission report, where he said ASIC should consider, at a starting point, whether a “court should determine the consequences of a contravention.”
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