Australian Securities and Investment Commission is readying a major crackdown on property spruiking to self managed super funds following a recent precedent-setting court ruling.
Commissioner Greg Tanzer said the recent Federal Court ruling that twice-bankrupt Gold Coast property developer Craig Gore and a cabal of associates including his Swedish wife Marina Gore, duped hundreds of investors into investing in a US property scam was "very important".
"The judgement did confirm our view that those who promote and make recommendation to investors about establish an SMSF or using an existing one to recommend that they manage their assets in a particular way or dispose superannuation assets are carrying on a financial services business and therefore need a licence," he said.
"Obviously the judgement goes further than that and makes finding about the conduct of individual directors and that they were knowingly concerned in those contraventions and the result of that unlicensed activity is that a number of investors lost substantial funds."
The court found Mr Gore and Ms Gore used the majority of the $4.75m raised from over 400 investors from around Australia through an unlicensed financial services firm ActiveSuper to furnish their lavish lifestyles including purchasing luxury vehicles and hiring private jets.
Only $450,000 of investor money was used for its intended purpose – to buy property in the US.
This Friday the Federal Court will hand down penalties to the Gores and others involved in the scam.
The win is also important to ASIC, with Mr Tanzer describing property spruiking as the "largest concern" in the sector that Australians have tipped over $500 billion of their super savings into. Scams involving foreign exchange providers spruiking to SMSFs was also of concern to ASIC, he said.
In the past 18 months, ASIC has launched separate legal action against Adelaide one-stop SMSF property investment shop Charterhill and Melbourne's Park Trent Properties. It issued an enforceable undertaking against float hopeful Spring Financial over property investment schemes for SMSFs. It entered into a negotiated resolution requiring ongoing surveillance with Lord Michael Ashcroft's financial services house Anne Street Partners regarding advice to clients about the establishment of SMSFs.
The regulator has also launched formal investigations into Interpac, chaired by Tax Practitioner Board member Roger Cotton and Perth's Sentry Financial Services.
Yet despite property investments and scams like the Gore's being a chief concern for the regulator, it was not cash-strapped ASIC's surveillance activities that uncovered the scam, Mr Tanzer revealed.
"With respect to ActiveSuper itself, ASIC's initial intelligence came from a cold call that came to an ASIC staff member who thought it sounded it suspicious and got some more information from the call and we were able to act after that."
Mr Tanzer concedes the problem of property spruikers duping investors through self-managed super funds has increased considerably since the laws were brought in 2009 to allow self managed funds to be borrowed for property.
However, he declined to be drawn on whether he thought the federal government's potential plans to crack down on lending to SMSFs for investment properties would help reduce the amount of fraud and misconduct in the sector.
"Policy decisions are a matter for Government and we note Assistant Treasurer Josh Frydenberg has said the Government will announce what it will do when it responds to the financial system inquiry," Mr Tanzer said.
This story was altered on May 4 to make it clear that ASIC's resolution with Anne Street Partners was not an enforceable undertaking.
