Concerned by the number of Australians convinced by “shameless sales tactics” to transfer their superannuation savings into complex and risky schemes through an SMSF or a platform product, Australian Securities and Investments Commission (ASIC) chair Joe Longo has said the system needs higher standards for the key gatekeepers.
Citing the Shield Master Fund and First Guardian Master Fund losses of more than $1 billion by 11,000 people, who were persuaded to roll out of their existing retirement savings vehicles into much riskier investments via a platform, Longo said bad actors were trying to exploit the significant funds in the superannuation system.
To get on top of this problem, ASIC has doubled the number of new financial advice-related investigations commenced since last year and almost doubled the number of new investment management probes.
There are also several issues under consideration by the regulator, including whether financial and professional indemnity requirements are adequate and potential requirements to place limits on what superannuation can be invested in.
“Should we demand more of superannuation trustees and responsible entities? Do we need to place restrictions on retail investments in high-risk funds? Is the current retail client definition still ‘fit for purpose’? Or do we have to slow down the process of rolling over superannuation and creating an SMSF?” Longo told the Financial Services Council Symposium on Shaping Advice in a Time of Change in Sydney yesterday.
He said a collective response, which required consideration of law reform in key areas, is necessary to ensure bad actors do not undermine trust in Australia’s superannuation sector.
“We need to ask ourselves whether some of the entities involved in this suspected misconduct are adequately captured by existing laws,” he said.
An ongoing focus for the regulator is reform in the managed investment scheme sector, which he said was very permissive given “the bar is so low to register one, it basically serves no barrier to entry at all”.
He called for better data collection powers for the regulator on managed investment schemes, including unregistered schemes.
“ASIC is working to make the system safer for consumers – but we can’t do it alone. It’s critical that we work together if we want to rebuild trust and create a genuine transformation in perceptions of the industry. That’s what it’s going to take,” he said.
