ASIC has just announced that it is moving to appoint receivers to five more unregistered property schemes associated with Melbourne company director Mark Ronald Letten.
ASIC alleges that Letten promoted and sold investments in the commercial property schemes that should have been registered under the Corporations Act.
It is generally illegal to market managed investment schemes that have not been registered with ASIC. The fact that an investment scheme is unregistered should be enough for investors to stay right away.
These hold twin dangers for investors. First, the investment advice may be worse than useless; it may destroy your personal wealth. Second, there is a high risk that investors are being encouraged to buy questionable investments.
In the past few months alone, ASIC has snared several individuals allegedly selling financial products without an Australian Financial Services licence and providing financial advice without a licence.
In a classic case last month, ASIC barred Barry Frank Jennings of Berry, NSW from providing financial services for five years. ASIC says its investigations showed that Jennings had provided services on behalf of Future Trading Corporation for three years. But neither Jennings nor the company held an Australian Financial Services licence.
Investors can easily check on ASIC’s website whether financial advisers and financial services businesses are licensed (see here).
The Tax Office’s 2010-11 compliance program warns that pressure will be maintained on promoters and participants in one of the most serial offences against superannuation law: trying to cash-in on preserved super savings before retirement.
Last financial year, the ATO – acting in its dual roles of tax collector and regulator of self-managed super funds – audited more than 1,100 individuals and 65 promoters, raising more than $65 million in liabilities. In some years, many thousands of promoters and super funds are investigated by the ATO and a number are referred to ASIC for further investigation and possible prosecution.
A much-favoured tactic used by promoters of early-access schemes is to convince often unsuspecting fund members to rollover their super from big super funds, which are under the strict supervision of trustee boards, into new DIY funds. And in the second stage of the scam, the DIY funds illegally pay out the entire super savings to members – with the promoters typically taking a huge rake-off.
Sometimes the promoters become even greedier and simply pinch the entire super after it leaves the big super funds.
Superannuation law specifies that preserved super benefits must be kept in super until members permanently retire after reaching 55. From July 1999, new super contributions and investment earnings must be preserved until retirement.
There is a particularly sad twist to illegal early-access super schemes. Many of the participants who pay so much to crooked promoters would be able to legally gain access to their super before retirement in limited instances of extreme financial hardship or on compassionate grounds.
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