The Australian Securities and Investments Commission (ASIC) has accepted an enforceable undertaking (EU) from Sydney-based CMH Financial Group and its sole director, Daniel White, following several instances of inappropriate SMSF advice.
The EU was a result of ASIC surveillance that revealed CMH provided financial product advice to clients about SMSFs that did not reflect the best interests of clients and failed to comply with product replacement advice disclosure obligations.
According to the corporate regulator, CMH representatives advised clients to engage in high-risk gearing strategies considered inappropriate given their specific circumstances and limited investment experience.
The advice provided by CMH also included persuading clients to establish SMSFs where the starting balances were below $200,000, which in ASIC’s view, taking into account the impact of CMH’s fees, was not in the best interests of clients.
“Setting up an SMSF is a significant financial step for consumers and many factors can impact their decision,” ASIC deputy chairman Peter Kell said.
“It is therefore important that consumers receive quality, compliant advice that will assist them in making informed decisions about their retirement savings.”
The surveillance further revealed concerns about the adequacy of risk management arrangements, adequacy of arrangements to manage conflicts of interest and procedures for ensuring the SMSF advice provided to clients did not contain false or misleading statements inducing them to deal in a financial product.
ASIC said CMH inadequately monitored and supervised representatives failing their obligation to ensure advisers were adequately trained and competent to provide SMSF advice.
In response to the regulator’s concerns, CMH has agreed to appoint an independent expert to undertake a program of pre-vet and audit reviews to test the compliance of SMSF advice prepared on behalf of CMH and address any deficiencies identified by the review.
Under the EU, CMH will also require all advisers providing SMSF advice to clients to complete specialist SMSF training.
“Advice providers need to ensure their processes and documentation demonstrates that they have acted in the best interests of their clients,” Kell said.