Last Friday ASIC issued a letter to each Real Estate Institute in the various states and territories, following reports that some real estate agents had advised tenants to consider accessing their superannuation to pay rent. ASIC has warned that such conduct may constitute unlicensed financial advice, in breach of the Corporations Act 2001 (Cth) (Corporations Act). The letter appears to be consistent with ASIC’s focus on matters where there is the risk of significant consumer harm and serves as a wider reminder, particularly as the Federal Government introduces various economic measures in response to the COVID-19 pandemic, that communications around financial products must be handled with care, as there are significant penalties for giving financial product advice without a licence.
Chapter 7 of the Corporations Act governs the provision of financial services. In summary:
- Any person who carries on a “financial services business” requires an Australian financial services licence or an authorisation from a licensee. A person will carry on a financial services business if they provide financial services with a requisite degree of repetition.
- A person provides a financial service if, amongst other things, they provide “financial product advice”, being a recommendation or statement of opinion, which is intended to influence a person in making a decision about a financial product (including for example, shares, insurance, a loan or superannuation fund) or could reasonably be regarded as being intended to have such an influence.
- Communications of purely factual information (being objectively ascertainable information whose truth or accuracy cannot be reasonably questioned) will generally not amount to financial product advice. However, factual information which is presented in a manner that may reasonably be regarded as suggesting or implying a recommendation to buy, sell or hold a particular financial product, can constitute financial product advice.
- Licensees have a general obligation to provide efficient, honest and fair financial services, as well as various other obligations regarding how the advice is delivered. Where the advice given is personal (rather than general) advice, there is a duty to act in the best interests of the person to whom it is given.
- Individuals who give unlicensed financial advice can be subjected to a maximum of five years imprisonment and/or a fine of up to $126,000 and corporations can be fined up to $1,260,000.
In its letter, ASIC considered that specifically pointing tenants to and recommending they consider the possibility of accessing superannuation is likely to amount to financial product advice. Further, this may breach the duty to act in the best interests of the individual when giving personal advice. ASIC notes that it “intends to monitor this situation closely” and “will not hesitate to act swiftly to protect vulnerable consumers”.
While the letter is focused on the actions of real estate agents, ASIC’s letter has equal application to any person giving guidance to others which relates to a financial product, particularly as a range of COVID-19-related legislative and regulatory measures come into effect which have bearing on individual financial circumstances.
If you would like further advice on the contents of ASIC’s letter or the financial services provisions of the Corporations Act, please contact our Propertyor Corporate and Mergers & Acquisitionsteam.