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ASIC warns SMSFs

Australian Securities and Investment Commission (ASIC) reminds superannuation fund members that it is the best course of action to obtain advice from a licensed financial adviser prior to agreeing to transfer superannuation out of a regulated fund into a self-managed super fund (SMSF). ASIC warns SMSFs on cryptocurrencies, specifically scams impacting SMSF because fraudsters continue to target elderly Australians and their retirement savings. 

Introduction – ASIC warns SMSFs

The regulator warned trustees to be cautious of offers presented online or through social media or online contact from anyone promoting an investment opportunity.  Also be cautious of cold calls, text messages, or emails with a recommendation to relocate your super to an SMSF, or to invest in crypto assets by way of your SMSF.

Australia possesses one of the highest per-capita rates of cryptocurrency ownership globally, with solid growth predicted to continue throughout 2022.  Concurrently, the amount of new self-managed super fund establishments also inflated in 2021, indicating a steady desire for working Australians to take control of their retirement funds.

Cryptocurrency scams have resulted from the convergence of those two factors.  The scams are designed to strip retirees of their savings once the crypto assets earn their trust.

In December last year, the Australian Competition and Consumer Commission (ACCC) revealed that losses due to cryptocurrency scams escalated by 172% between January and November, totalling approximately $109 million.  The figures only represented losses reported to the commission, suggesting the actual cost is even greater.

ASIC has observed this increase in crypto scams in the past.  However, the regulator says it has noticed a spike in marketing aimed explicitly towards SMSF trustees.

In addition to the likelihood of falling victim to deceitful crypto schemes or the next Non-fungible Token (NFT) revolution, ASIC has also reminded trustees to do their due diligence concerning the tax requirements of ‘legitimate’ crypto capital.

Obtaining professional financial and legal advice is recommended, but ASIC reinforced that responsibility ultimately lies with a person whose name is on the paperwork.

“As the trustee of your SMSF, you ultimately bear responsibility for the fund’s decisions and for complying with the law even if you rely on other people’s advice — licensed or otherwise,” ASIC said.

Prior to crypto and NFT assets reaching traditional superannuation funds through regulated Exchange Traded Funds (ETFs), the message is to ensure you do your due diligence and think twice before investing your life’s savings on a cartoon monkey.

Consider the risks and seek professional advice prior to forming an SMSF.

Creating an SMSF is one of the most significant decisions you can make relating to your retirement savings.  Before setting up an SMSF, obtain financial advice from a licensed adviser.  Do not trust social media ads or online contact from someone promoting an ‘investment opportunity.  Be wary of cold calls, SMS or emails recommending to transfer your super to an SMSF or invest in crypto-assets via your SMSF.

When developing, implementing and reviewing an investment strategy, ASIC stated that SMSF trustees must document how their fund’s investments will achieve their retirement goals regarding diversification, the risks of inadequate diversification, liquidity, and the fund’s ability to fulfil its liabilities.

You must also have the capacity to demonstrate that the asset is owned by the fund.  The Australian Taxation Office (ATO) website provides information regarding these obligations.  ASIC states that a licensed financial adviser can help you formulate an appropriate investment strategy.

“Setting up an SMSF is one of the most significant decisions you can make relating to your retirement savings,” said the regulator.

“Before deciding to set up an SMSF, seek advice from a licensed financial adviser.”

Investing into crypto-assets: ASIC warns SMSFs

Australians who choose to self-manage their super ought to carefully consider the risks prior to utilising their SMSF to invest in NFTs or crypto-assets.  As trustee of your SMSF, the onus is on you for the fund’s decisions and compliance with the law even if you depend on other people’s advice – licensed or otherwise.  

If you choose to set up an SMSF, you must obtain professional advice to determine which investments to make.  There are rules regulating investments the SMSF can make and the taxation consequences for those investments, including NFTs and cryptocurrencies.

 Any investment needs to be authorised under the fund’s trust deed and adhere to the fund’s investment strategy. 

Product issuers and market operators should also consider ASIC’s recent publications on meeting regulatory obligations concerning crypto-asset ETPs and other investment products.

ASIC action

In November 2021, ASIC shut down a Queensland unlicensed financial services business A-One Multi Services Pty Ltd.  The Gold Coast-based company appeared to be engaging in unlawful activity, with ASIC alleging more than $2.4 million was transferred from A-One Multi to buy crypto-assets.

ASIC successfully pursued interim orders and injunctions from the Federal Court in Queensland against A One Multi and its directors Aryn Hala and Heidi Walters to protect investors.  Mr Hala represents investors who assist clients invest their superannuation in an SMSF and subsequently loaning their SMSF money to A One Multi. ASIC alleges Mr Hala told investors that they would receive annual investment returns of over 20%.

Subsequently, Hala used more than $5.7 million of A-One Multi’s money for his and Walters’ personal gain.  One example of this is acquiring real property and luxury vehicles in their names, of approximately $25 million deposited by more than 60 consumers into A One Multi’s accounts between January 2019 and June 2021. 

ASIC moved swiftly to obtain the orders given the ease with which crypto assets could be transferred or transacted. 

Vogue Advisory Group – Providing support if you think you may be scammed or have been scammed.

If you have any queries or concerns regarding your current SMSF, potential scams, have been scammed, or wish to set up an SMSF, please get in touch with us, and we can help you.