The corporate regulator says a national network of advisers pocketed $5000 per client for recommending real estate investments through a self-managed superannuation fund.
The Australian Securities and Investments Commission is taking RM Capital and its authorised representative, SMSF Club, to the Federal Court, alleging they accepted more than $730,000 in referral fees for spruiking properties marketed by Positive RealEstate, the regulator announced on Tuesday.
ASIC alleges the referral arrangement ran from December 2013 to July 2016, court documents show.
It alleges each time clients used their SMSF to buy a property marketed by Positive RealEstate, Positive RealEstate paid about $5000 in "referral fee" either directly to SMSF Club, or indirectly to RM Capital, which then passed on most of the fee to SMSF Club.
According to ASIC, SMSF Club's advisers presented at least 15 property seminars and at least 43 "mentoring program workshops" held by Positive RealEstate, where they recommended attendees set up an SMSF and invest in real estate through the fund.
SMSF Club advisers gave advice to clients, emphasising the benefits of SMSF property investing and downplaying the risks of doing so, allege the court documents filed by ASIC on Friday.
It says RM Capital had a conflict-of-interest policy, but it did not ban advisers from receiving conflicted remuneration, merely stating advisers needed to record "soft dollar benefits" of $300 or more in a register.
ASIC says RM Capital had a draft policy that stated incorrectly that the ban on conflicted remuneration applied only to giving personal advice to retail clients.
RM Capital was advised by Saxo Capital the draft policy was wrong, but failed to fix it, ASIC claims. Saxo Capital was advising RM Capital on the adequacy of its policies.
According to its website, SMSF Club is a "membership program designed to help people take control of their superannuation investment decisions" and operates nationally via home-study DVD programs, monthly webinars and newsletters.
Since the Future of Financial Advice reforms kicked off in July 2013, it has been illegal for advisers to accept conflicted remuneration.
However, this is the first court action ASIC has launched alleging for illegally accepting conflicted remuneration.
ASIC is seeking declarations of contravention, civil penalties and compliance orders against RM Capital and SMSF Club.
If found liable, RM Capital and SMSF Club may face a maximum $259 million fine. ASIC's case is they breached the law as many as 259 times and the maximum penalty for breaching the law is $1 million.
RM Capital, SMSF Club and Positive RealEstate did not respond to The Australian Financial Review's requests for comment.
A court date has yet to be set.
By Misa Han
12 June 2019