Squirrel Super hit with $55K false and misleading marketing penalty

Squirrel Super has been ordered to pay a $55,000 penalty for false and misleading marketing regarding investing in residential property via self-managed superannuation funds.

The Australian Securities and Investments Commission (ASIC) has announced that the Federal Court imposed the penalty after finding Squirrel distributed a brochure conveying misleading representations about residential property returns at a seminar and via e-mail on about 9,420 occasions between March 2015 and January, 2019.

It said Squirrel was found to have engaged in conduct that was misleading and deceptive or likely to mislead or deceive.

ASIC Deputy Chair Sarah Court said ‘The SMSF sector holds an estimated total value of assets of just over $876 billion. Misleading information about SMSFs can greatly impact the sector so it is important that clear and accurate information is provided to those looking to set up an SMSF.

“ASIC issued two infringement notices about the Squirrel marketing material that were not paid. Entities should be aware that by not paying infringement notices, they risk higher penalties imposed by the Court,” she said.

The Court found that the brochure, titled ‘How buying established residential property can super charge your superannuation?’, made a series of misleading representations, including that:

• residential property in metropolitan locations was likely to double in value every 7-10 years and generate a rental return of around 4 – 5% per annum;
• purchasing an $800,000 residential investment property using a 25% deposit from an SMSF and taking out a mortgage for the balance would produce an average total annual return of 14%;
• 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.

Justice Burley of the Federal Court noted that ‘Squirrel’s misconduct was compounded when it continued to disseminate the brochure after receiving verbal feedback from attendees [following a seminar] in April 2015 and, more particularly, after it had received notification from ASIC about its concerns in July 2018. The fact that Squirrel approved and distributed the brochure over an extended period may be taken to reflect a poor corporate culture of compliance and indicate that Squirrel had inadequate systems in place to ensure compliance with the Act.’

His Honour also noted that ‘Squirrel has a mixed record when it comes to cooperation with ASIC. Following notification of [ASIC’s] concerns, Squirrel purported to cease using the brochure, but then continued its distribution. It also misled ASIC as to the number of occasions it had distributed the brochure. Furthermore, while [Squirrel] accepted liability to pay two infringement notices relating to the brochure, it failed to pay them. Such conduct should be discouraged.’