Squirrel penalised for false investment claims

Squirrel SMSF investment

Squirrel Superannuation Services has been ordered to pay a penalty after ASIC found it falsely marketed investment returns for residential property held via SMSFs.

Online SMSF establishment and administration platform Squirrel Superannuation Services has been ordered to pay a $55,000 penalty for false marketing regarding investment returns from residential property through SMSFs.

Squirrel was ordered to pay the penalty after it was found to have made misleading representations about the investment returns via an SMSF in a brochure distributed via email and during a seminar on around 9420 occasions from March 2015 to January 2019.

The brochure claimed residential property in metropolitan locations was likely to double in value every seven to 10 years and generate a rental return of roughly 4 per cent to 5 per cent a year.

The Australian Securities and Investments Commission (ASIC), which brought the court action, said the brochure also claimed there was a large difference in investment returns when using a super fund compared to using an SMSF that purchased residential property, and the cost of managing an investment property via an SMSF was low compared with using a financial planner to select various managed investment funds.

After the decision by the Federal Court to issue the penalty, ASIC noted it had issued two infringement notices to Squirrel regarding the same conduct in October 2018, which it had failed to pay, resulting in ASIC taking the matter to the Federal Court in December 2020.

“ASIC issued two infringement notices about the Squirrel marketing material that were not paid. Entities should be aware that by not paying infringement notices, they risk higher penalties imposed by the court,” ASIC deputy chair Sarah Court said.

Federal Court Justice Stephen Burley added the accused company, which was placed in voluntary administration in August 2019 and is now under new management, of misleading ASIC and failing to pay the infringement notices relating to the brochure despite accepting liability.

‘Squirrel’s misconduct was compounded when it continued to disseminate the brochure after receiving verbal feedback from attendees [following a seminar] in April 2015 and, more particularly, after it had received notification from ASIC about its concerns in July 2018,” he said.

“The fact that Squirrel approved and distributed the brochure over an extended period may be taken to reflect a poor corporate culture of compliance and indicate that Squirrel had inadequate systems in place to ensure compliance with the act.

“Squirrel has a mixed record when it comes to cooperation with ASIC. Following notification of [ASIC’s] concerns, Squirrel purported to cease using the brochure, but then continued its distribution. It also misled ASIC as to the number of occasions it had distributed the brochure.”

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