The Australian federal court has ordered Squirrel Superannuation Services to pay a A$55,000 (£31,100, $39,000, €36,400) penalty for false and misleading marketing.
The communication was related to investments in residential property via self-managed superannuation funds (SMSF).
The court found that the firm distributed a brochure which misrepresented the investments returns associated with residential property. This happened at a seminar and also via 9,420 emails between March 2015 and January 2019.
The marketing material claimed that:
- Residential property in metropolitan locations was likely to double in value every seven to 10 years and generate a total return of 4-5% per annum;
- Purchasing an A$800,000 residential investment property by using a 25% deposit from an SMSF and taking out a mortgage for the remainder would produce a total annual return of 14%;
- There was a “remarkable” difference between investing in a superannuation fund (7%) compared with a self-managed one that purchased residential property (14%); and,
- The costs of managing an investment property through an SMSF were “surprisingly low” compared with using a financial planner to select a range of managed investment funds.
Failure to comply
The Australian Securities and Investments Commission (Asic) had already issued two infringement notices to the company in October 2018 regarding the same conduct, but Squirrel failed to pay, it said.
As a result, the regulator took the matter to the federal court in December 2020.
Asic deputy chair Sarah Court said: “The SMSF sector holds an estimated total value of assets of just over A$876bn. Misleading information about SMSFs can greatly impact the sector so it is important that clear and accurate information is provided to those looking to set up an SMSF.
“Asic issued two infringement notices about the Squirrel marketing material that were not paid. Entities should be aware that by not paying infringement notices, they risk higher penalties imposed by the court.”
Justice Burley added: “Squirrel’s misconduct was compounded when it continued to disseminate the brochure after receiving verbal feedback from attendees [following a seminar] in April 2015 and, more particularly, after it had received notification from Asic about its concerns in July 2018.
“The fact that Squirrel approved and distributed the brochure over an extended period may be taken to reflect a poor corporate culture of compliance and indicate that Squirrel had inadequate systems in place.
“Squirrel has a mixed record when it comes to cooperation with Asic. Following notification of [Asic’s] concerns, Squirrel purported to cease using the brochure, but then continued its distribution. It also misled Asic as to the number of occasions it had distributed the brochure.
“Furthermore, while [Squirrel] accepted liability to pay two infringement notices relating to the brochure, it failed to pay them. Such conduct should be discouraged.”