The other regulator

Liz Westover

When the following question is asked: “Who is the regulator in the SMSF market?”, the answer is nearly always “the Australian Taxation Office (ATO)”. For the most part, this is correct. The ATO is the regulator of SMSFs.

However, for service providers in the SMSF market, the Australian Securities and Investments Commission (ASIC) has a growing role and is becoming far more visible in this segment – indeed, ASIC has described its role as the regulator of SMSF gatekeepers.

So what can we expect from the corporate regulator’s increased presence in this space?

SMSF auditor registration

ASIC is now the registering body for all SMSF auditors. From 1 July 2013, auditors signing off on SMSF auditor reports must be registered and hold an SMSF auditor number issued by ASIC. The policing of SMSF auditors will continue to be carried out by the ATO. Where issues with SMSF auditors are found, the ATO will make referrals to ASIC for disciplinary or other action, as appropriate. Sanctions may include disqualification, suspension or cancellation of registration, enforceable undertakings or conditions being placed on an auditor’s registration. It will be interesting to see how these two bodies work together in this co-regulatory capacity. It is likely the ATO will review its ‘auditing the auditor’ program in light of the new registration process and it is expected ASIC will take firm action against auditors referred to them by the ATO who have failed to meet their responsibilities as auditors and gatekeepers in the industry.

SMSF advice

ASIC’s objectives in the SMSF advice arena are threefold. Firstly, it wants to ensure advice to set up an SMSF is only given to those for whom an SMSF is suitable. Secondly, it wants trustees to receive good-quality advice and services from SMSF gatekeepers and thirdly to gain a better understanding of advice practices.

In September 2012, ASIC set up an SMSF taskforce to review the quality of advice being provided to SMSF trustees. This taskforce was established in response to a number of events, including the continued strong growth in SMSFs, an increase in geared investments within SMSFs, the Trio collapse and the subsequent parliamentary joint committee inquiry. Following on from research undertaken by this taskforce, ASIC released a report in April.

Despite the review being conducted on ‘high-risk’ pieces of advice, ASIC found the quality of advice to be adequate – an encouraging result. However, pockets of advice were found to be of poor quality, mostly to do with SMSFs set up to gear into real property.

Inappropriate advice in relation to borrowing arrangements in SMSFs has increasingly been an issue for the industry. Of greatest concern are the property spruikers who encourage (and in some cases recommend) the set up of an SMSF in order to use super savings together with a borrowing arrangement to buy property. In many instances, the borrowing itself would not be deemed to be appropriate, but of greater concern is the lack of evaluation about the suitability of an SMSF. In highlighting this type of poor and/or inappropriate advice in its recent report, ASIC expressed its intent to take regulatory action where this is identified.

In an effort to protect investors, ASIC has and will continue to take enforcement action to stop unlicensed SMSF advice and misleading advertising.

Accountants’ exemption

It is anticipated ASIC will be working closely with accountants and the professional accounting bodies with regard to the removal of the accountants’ exemption and the introduction of the new limited licensing regime for accountants. With the regulations for the new regime recently finalised, ASIC in fact has just issued guidance around the licensing requirements and implementation.


Education will also be a feature of ASIC’s work in the SMSF space. It is keen to facilitate and provide access to reliable and accurate information to advisers and trustees about SMSFs and their investments. ASIC’s MoneySmart website contains SMSF-specific information and its recent report contained tips for SMSF advice providers.

The gatekeepers in the SMSF industry will now be operating within a more comprehensive regulatory environment. The message for those offering services in this space is to make sure you are appropriately licensed and meet your compliance obligations.

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