The Australian Securities & Investment Commission (Asic) has started civil legal proceedings against Squirrel Superannuation Services for false or misleading representation.
The watchdog alleges that from January 2015 the financial technology business “marketed and sold services helping customer establish and operate self-managed superannuation funds (SMSF) to purchase established residential property”.
The first brochure was published and distributed in March 2015 to “thousands of members of the public” via email, and hard copies were handed out at a seminar in April 2015.
According to the regulator, the marketing material claimed that residential properties in metropolitan locations double in value “every seven to 10 years and generate a rental return of around 4-5% per annum”.
Squirrel’s brochure implied that buying residential property could “super charge” a person’s superannuation fund.
Seeking fines
Additionally, the regulator alleges that the tech business claimed people could get “certain average returns” by using a deposit from a SMSF; customers could benefit from 14% returns, compared with 7% if investing in a regular superannuation fund; and it claimed that costs of managing an investment property through a SMSF were “surprisingly low”.
According to the watchdog, self-managed superannuation funds represent around 26% of total assets held in the sector. Currently, there are over 591,000 SMSFs holding a total of A$728bn (£408bn, $550bn, €452bn) in assets.
Asic added: “The provision of misleading information about SMSFs undermines the SMSF sector and limits the ability of Australian consumers to make confident and informed decisions about their superannuation savings. Asic is seeking declarations, pecuniary penalties and cost orders against Squirrel.”
The federal court is yet to schedule a date for the first hearing.
