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ASIC looks to impose greater SMSF disclosure

The Australian Securities and Investments Commission (ASIC) is proposing an increase in the disclosure requirements for SMSFs.

ASIC commissioner John Price revealed the regulator’s SMSF taskforce’s intentions on Friday at the 2013 Institute of Public Accountants National Congress on the Gold Coast.

“We are actually proposing to change the law to set out some specific disclosure requirements for AFS (Australian financial services) licensees and their authorised representatives who have given personal advice to clients about establishing or switching to a self-managed super fund,” Price said.

“The sorts of disclosure we are considering introducing are around things like the duties and obligations associated with running a fund, including the trustees remaining responsible for managing the fund even if they outsource some or all of their responsibilities.”

Other areas where ASIC was looking to implement disclosure requirements included the risk involved with running an SMSF, the investment strategy employed, the time commitment and skills of the trustees involved, the cost of running the fund, the winding up of the fund should that be needed, and the need to consider an exit strategy as well, he said.

He pointed out the regulator intended to focus much of its attention on the cost of having an SMSF.

“In our view it’s very important to consider cost when making a recommendation to someone and providing them with advice to establish or switch to an SMSF,” he said.

ASIC had in 2012 already commissioned research conducted by Rice Warner on the cost of running an SMSF.

“The actuaries’ research found there was a range of costs that reflect the range of complexities in self-managed super itself,” Price said.

The study showed funds with balances under $100,000 were not cost effective in comparison to Australian Prudential Regulation Authority regulated funds and only SMSFs with balances over $500,000 were cost effective on a full-service basis when compared to other funds in the industry, he said.

Despite those results, he emphasised ASIC was not looking to be intrusive about the issue.

“To be very, very clear, ASIC is not … proposing a mandated minimum balance for these funds,” he said.

“Rather we’re looking to promote debate and provide further guidance on this issue based on research and industry and investor views.”

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