On 23 December 2020, ASIC commenced civil penalty proceedings in the Federal Court against Squirrel Superannuation Services Pty Ltd (Squirrel) for false or misleading representations.
Squirrel is a financial technology company that holds an Australian financial services licence (AFSL). ASIC alleges that from around January 2015, Squirrel marketed and sold services helping customers establish and operate self-managed superannuation funds (SMSF) to purchase established residential property.
In March 2015, Squirrel first published and distributed a brochure headed ‘How buying established residential property can super charge your superannuation?’. ASIC alleges that between around March 2015 and July 2018, Squirrel provided the brochure to thousands of members of the public by email and distributed hard copies at a seminar held on 28 April 2015.
ASIC alleges Squirrel, in its brochure, made misleading representations that:
‘… residential property in metropolitan locations doubles in value every 7-10 years and generates a rental return of around 4 – 5% per annum’;
using a deposit from an SMSF to purchase residential investment property could obtain certain average returns;
there is a ‘remarkable’ difference in returns between investing in a regular superannuation fund (7%) and using an SMSF that purchased residential property (14%); and
the costs of managing an investment property through an SMSF are ‘surprisingly low’ compared with using a financial planner to select a series of managed investment funds.
SMSFs are a key part of the superannuation sector and represent approximately 26% of total assets held. There are now over 591,000 SMSFs, holding an estimated total value of assets of just over $728 billion.
A healthy and sound SMSF sector is important for the operation of Australia’s superannuation system. Supporting this system is a key priority for ASIC. 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 date for the first case management hearing is yet to be scheduled by the Court.
In July 2018, Squirrel ceased distributing the brochure following communications with ASIC. In December 2018, following further inquiries, ASIC commenced a full investigation, culminating in the filing of these proceedings.
Consumers need to be able to make confident and informed decisions about setting up and managing an SMSF, based on good quality, appropriate and accurate advice and information.
ASIC does not regulate SMSFs. ASIC’s role is to regulate providers of services to SMSF trustees, such as SMSF auditors and financial advisers, and those who issue the financial products that SMSFs invest in. This complements ASIC’s role as a conduct regulator for registrable superannuation entity licensees. As conduct regulator for superannuation, our priorities in superannuation have a consumer focus.
ASIC’s Moneysmart website has information about self-managed super, which includes guidance for consumers about using an SMSF to invest in property.
A case management hearing was held on Friday 6 August 2021. The next case management hearing is listed for Thursday 30 September.
Editor’s note 2:
The matter is next listed on 15 March 2022.
Editor’s note 3:
On 15 March 2022, the penalty hearing against Squirrel was heard before His Honour Justice Burley. The Court has reserved its judgment.