The corporate watchdog’s swift warning to real estate agents about giving unqualified financial advice to virus-hit tenants has been welcomed by industry bodies and the MP who raised the issue.
Shadow assistant treasurer Stephen Jones told realestate.com.au he wrote to the Australian Securities and Investments Commission on 1 April after seeing “more than one or two” emails from real estate agents advising tenants to access their superannuation to cover rent shortfalls.
In his letter, Mr Jones wrote he was concerned the advice was not being given in the best interest of renters, and that “early access to super should be a last resort”.
ASIC responded with an urgent letter to peak real estate bodies Friday morning, cautioning the risk of hefty fines and up to five years jail for breaching the Corporations Act, which only allows financial advice to be provided by qualified and licensed parties.
“Tenants facing financial difficulty need sound financial guidance and potentially debt counselling. Specifically pointing them to and recommending them to consider the specific possibility of accessing superannuation is … likely to amount to a breach of the act,” wrote ASIC’s executive director of financial services enforcement, Tim Mullaly.
“As part of the Federal Government’s COVID-19 economic response package, the Australian Tax Office is putting in place measures to allow people affected by COVID-19 to access their superannuation early, up to $10,000 in 2019-2020 and a further $10,000 in 2020-2021.
“ASIC is aware that some real estate agents are advising tenants who are unable to pay their rent, or who may find themselves in such a situation in future, to consider applying for early release of their superannuation,” the regulator wrote, describing this as of “significant concern”.
Jones said, it’s “easy to see why agents may feel picked on” during this complex period across multiple sectors, but that “it’s better to clear up any confusion so that everyone knows it’s not allowed.”
“I’m certain that the vast majority of real estate agents are doing the right thing, and I’m going to assume that those cases who weren’t did it without realising,” he said.
“But in the current environment, it’s best we nip things in the bud; it’s always better to stop someone who’s doing the wrong thing rather than to track them down and prosecute after the fact.
“Nobody wants to see that happen. Prevention is always better than a cure.”
‘This will lay the ground rules’: REIA
Adrian Kelly, president of the Real Estate Institute of Australia, was also appreciative of ASIC’s deliverance of clear information for the industry to avoid any further concerns or confusion.
“Agents should not be providing financial advice to anyone as that’s illegal. Financial advice must only be provided by qualified and licensed financial advisers, or financial counsellors,” he said.
“Agents can give guidance to a tenant as to where information regarding their financial affairs is available such as the ASIC Moneysmart website, as well as to government announcements about assistance in the current crisis.”
“It was a surprise to us”
REINSW president Leanne Pilkington said ASIC’s letter came as a surprise because “agents know they’re not in a position to offer financial advice and typically don’t”.
“I’m not across the detail of this particular situation but, if I had to guess, it was probably a property manager saying these are all the options available, go and investigate,” she told realestate.com.au.
“But we’ve gone out today to all our membership, and industry at large, that it’s not appropriate.
“I would assume it was somebody trying to be helpful, but it’s an important point that agents need to be mindful of.
“We’re in uncharted territory and people are just trying to do their best.”
The Real Estate Institute of Victoria was also contacted for comment but did not respond.
“ASIC intends to monitor this situation closely”
Today’s letter showed a clear intention to safeguard “vulnerable” tenants from receiving poor advice.
“ASIC intends to monitor this situation closely, and if contraventions of the licensing requirements of the Corporations Act are found, ASIC will not hesitate to act swiftly to protect vulnerable consumers,” Mullaly wrote.
“Tenants facing financial difficulty need sound financial guidance and potentially debt counselling.”
The potential penalties for a breach can be a maximum of five years imprisonment and/or a fine of up to $126,000 for individuals, and for corporations, a fine of up to $1.26 million.
Jones said the unprecedented nature of the COVID-19 climate is “absolutely showing the need to work together”.
“Everyone’s going to take a bit of a haircut during this process,” he said.
“Those tenants who can’t pay rent, it’s because they’ve lost their job. This is not a licence for every tenant in the country to put their feet up and not pay the rent.
“It’s about putting hardship measures in place and making sure we all get through this as best as possible.
“It’s all happening so quickly – things are coming up every day that no-one had really thought about, so we’re just looking at how we can fix it and move forward.”