I have sympathy for this argument, because an accountant whose advice went further than just assisting with the establishment of an SMSF, would have had to have been licensed already (say, as a financial planner). However, it is now the law and the accounting profession was given a three-year transitional period to organise its affairs.
As a consultant specialising in financial services compliance and licensing, I noted a recurring theme — the process to obtain an AFS Licence is an onerous expedition which does not even come close to satisfying a cost/benefit analysis. Accountants were faced with three alternatives — obtain their own AFS Licence, become an authorised representative of a licensee, or cease providing SMSF services.
However, a fourth alternative has since been noted. It has become apparent that some accountants have taken the view that they do not fall within the licensing regime as they are not carrying on a financial services business.
It is important to consider the limbs that constitute a financial services business — a financial product and a financial service.
An SMSF is a superannuation product, which is itself a financial product. (The accountants’ exemption previously excluded an SMSF as a financial product).
There are two financial services relevant to accountants who are involved with SMSFs — advising and dealing. It is here where some accountants are claiming that they are not providing a financial service.
In regard to the former, it is accepted that ordinarily, the provision of factual information does not constitute financial product advice. ASIC Regulatory Guide 36 (“RG36”) provides additional insight and defines factual information as “objectively ascertainable information whose truth or accuracy cannot be reasonably questioned.”
However, it is important to note that there are instances whereby such communication may in fact amount to financial product advice.
In particular, RG36 states that “where factual information is presented in a manner that may reasonably be regarded as suggesting or implying a recommendation to buy, sell or hold a particular financial product or class of financial products, the communication may constitute financial product advice”. An example of this is where the characteristics of two financial products are described in a way which suggests that one is superior to the other.
The Corporations Act 2001 (Cth) states that financial product advice means “a recommendation or a statement of opinion, or a report of either of those things, that is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or could reasonably be regarded as being intended to have such an influence”.
It is therefore important to note that even if one concludes that the provision of factual information is not advice, the wording of the definition may suggest otherwise, especially taking into account the subjectivity derived from the words, “could reasonably be regarded as being intended”.
In this way, if a non-licensed accountant provides information about an SMSF, its concessional tax rates or the manner by which investments may be controlled for the benefit of its members, ASIC may deem this to be financial product advice, because it influenced (even in a small way) an individual to establish such a structure.
As a side note, it is also important for an accountant to be aware of the limitations associated with providing a class of financial product advice (where applicable).
The definition of “dealing” extends further than simply buying, selling or varying a financial product — it also includes applying for and arranging for. It is essential to understand the extent by which this definition impacts an accountant and the manner by which these services are provided.
An accountant who provides assistance to the establishment of a client’s SMSF will most likely be dealing in a financial product. This act includes not just handling the paperwork, but also forwarding on the forms and documents provided by a client to an applicable service provider.
Ultimately, whether the activities of an accountant assisting their client constitutes arranging is a question of degree. RG36 provides some guidance in this regard. Generally, a person’s conduct may constitute arranging if their involvement in the chain of events leading to the relevant dealing is of sufficient importance that without that involvement, the transaction would probably not take place. Also, it is important to consider whether the person derives a financial benefit from the transaction.
Accountants who completely remove themselves from any potential involvement by simply referring or introducing a client to the service provider for them to undertake the establishment of the SMSF themselves, will not be seen as dealing. However, in all other instances, it is hard to argue this is not the case.
In conclusion, it is important that accountants ensure that they are not inadvertently providing a financial service (advising or dealing) without being appropriately licensed. An accountant cannot simply assume that they are outside the licensing regime due to their passive involvement in communicating with a client about an SMSF or assisting in the fund’s establishment.
Accountants must be acutely aware of their obligations, especially in light of ongoing surveillance of unlicensed practitioners who provide financial services in the SMSF sector.