ASIC jails and fines dodgy SMSF advisors: Three lessons to keep your money safe

A former self-managed superannuation fund advisor has been issued a suspended sentence of 18 months, while the ‘mastermind’ of more than a dozen unregistered offshore funds targeting Australian investors and SMSFs has been fined a record $500,000.

The crackdown comes as the Australian Securities and Investments Commission and Australian legal authorities are increasingly facing a larger number of investment frauds targeting SMSF investors.

Craig Dangar pleaded guilty in the New South Wales District Court to two charges brought by ASIC of obtaining financial advantage by deception and was consequently issued the suspended sentence.

Dangar scammed $250,000 by recommending two of his clients purchase a portion of his shares in Morris Finance, but he failed to disclose his ownership of the shares and his position as a company director.

The charges followed an investigation into Dangar’s conduct between January 2004 and September 2007 while he was employed to provide superannuation advice to trustees of SMSFs and compliance advice to accounting firms.

In 2009, ASIC banned Dangar from providing financial services for 10 years following an investigation into his conduct while he was working for SMSF Consultants.

Previously, Dangar had worked for established finance advisory firm Count Financial and was an authorised representative of Charter Financial Planning.

Morris Finance was contacted by SmartCompany but it was unable to comment as Dangar is still to be sentenced on a related charge.

ASIC commissioner Peter Kell said in a statement the corporate watchdog is focused on promoting the integrity of the self-managed super industry.

“This case is a reminder to industry participants in the self-managed super space that dishonest conduct will not be tolerated and can lead to criminal conviction,” Kell said.

In a separate case yesterday, David Hobbs of Nelson, New Zealand was fined $500,000 (the largest amount in ASIC’s history) and permanently banned from managing companies and providing financial services for operating a series of unlicensed funds targeting Australian SMSFs.

More than $55 million was invested in 14 individual investment funds, including a $30 million Ponzi scheme, in countries including New Zealand, the United States, Hong Kong, Vanuatu, the Bahamas, Anguilla, and the Turks and Caicos Islands.

Yesterday, Justice Julie Ward in the NSW Supreme Court also penalised David Collard and his wife $150,000 and $20,000 respectively.

In her findings, Ward said Hobbs pried on “unsophisticated investors” and sought to put in place a structure deliberately intending to avoid regulatory supervision.

Ward described the scheme as “one presented to unsophisticated investors as a ‘get rich quick’ scheme with no risk of loss of capital and a huge upside on the profits by reason of their investment”.

SmartCompany spoke to senior tax writer with Thomson Reuters, Terry Hayes, and director of education and professional standards with the SMSF Professionals Association of Australia, Graeme Colley, about how to detect dodgy schemes and advisors.

1. If it’s too good to be true, it probably is

Hayes and Colley agreed if an investment seems “too good to be true” you should trust your instincts and seek advice, because it probably is.

“If you get offered advice that seems too good to be true, just step back a bit before acting,” Hayes says.

“If something is being promoted on the basis of outstanding investment, think about the risk and returns. High return often means high risk. If they’re speculative or unusual investments, the returns may be high but they also have very high risk,” Colley says.

2. Make sure they are registered or licensed

Colley says if you’re looking at an investment or advisor in Australia make sure either are registered with ASIC.

“Make sure the investment has credibility in Australia. If it has approval from ASIC there is regulatory control, whereas overseas they have no right to interfere other than to ban people,” Hayes says.

“When there is fraud involved it can be very difficult to work out if they are legitimate but at least if they are in Australian rather than overseas you have a right to complain and to seek compensation,” he says.

3. Seek a second opinion

If you’re considering an investment or think you’re not certain about the advice you’ve been given, Hayes and Colley advise to consider seeking a second opinion.

“Overall it’s difficult to put yourself in the shoes of the people getting this advice. Individuals are always looking for the best returns, but perhaps get a second opinion. It might incur more costs, but if you have an inkling something isn’t right, seek other advice,” Hayes says.

Colley says friends can also be a good source of information.

“Make sure you get a second opinion which may or may not confirm your thoughts. In some cases, word of mouth is also good,” Colley says.