SPAA issues warning on simplistic disclosure
The Self Managed Super Fund Professionals' Association of Australia (SPAA) has outlined its stance on the disclosure of SMSF risks in its submission to the Australian Securities and Investments Commission (ASIC) on Consultation Paper CP216.
In that submission, Andrea Slattery, chief executive officer of SPAA, said the organisation welcomed ASIC's goal to improve the standard of advice given to prospective SMSF trustees.
"This includes disclosures on the risks associated with SMSFs," she said.
"However, the requirements in the ASIC paper may not achieve those goals or be appropriate in the circumstances.
"We believe the general impetus to improve disclosure in order to reduce risks for consumers is merited and will strengthen the integrity of the SMSF sector but ASIC's recommendation that advisers must provide a warning that SMSFs are not entitled to Part 23 compensation under the SIS Act is too simplistic," continued Slattery.
"This approach ignores the complex nature of compensation for funds affected by fraud or theft.
"APRA-regulated funds are not guaranteed compensation under the SIS Act for fraud or theft and the fact that SMSFs do have other avenues for seeking compensation for theft or fraud has been ignored."
Slattery said that in its submission SPAA had pointed ASIC to the uncertain nature of Part 23 compensation for APRA-regulated funds.
"The proposed disclosure perpetuates the common misconception that APRA-regulated funds will definitely receive compensation if the fund is a victim of fraud or theft," she said.
"Instead, we believe any warning that SMSFs are not entitled to Part 23 compensation should be made in the broader context of advisers discussing all compensation arrangements available to SMSFs."
Slattery said that SPAA's submission supported the other SMSF risk disclosures suggested by ASIC but warned that these risks often depended on the individual circumstances of the SMSF and their members.
Originally published by SMSF Essentials.
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