Spruiker group faces Supreme Court's wrath
Dodgy advice relating to property investment within superannuation funds has proven to be a real estate company’s undoing.
The Supreme Court of NSW has this week issued a damning verdict against Park Trent Properties Group after it was found to have taken advantage of "unsophisticated investors".
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Following ASIC action, the court found that Park Trent Properties Group unlawfully carried on a financial services business for more than five years by providing advice to clients to purchase investment properties through an SMSF.
The Wollongong business promotes itself as a “full service real estate company” that offers sales services, property management and investment advice.
ASIC said that Park Trent had advised more than 860 consumers to establish and switch funds into an SMSF by the time the trial started in June.
In his judgement, acting justice Ronald Sackville said that Park Trent's business model depended on “persuading relatively unsophisticated investors of the virtues of using their superannuation accounts to purchase investment properties and to establish SMSFs”.
“Investors were influenced to make important decisions concerning their superannuation strategy with little or no genuine consideration of whether the decision took proper account of their individual financial circumstances. Some suffered financial loss as a consequence,” he added.
Acting Justice Sackville said his decision “serves as a warning” to real estate businesses that seek to influence clients to establish SMSFs for investment purposes without having the necessary licence to do so.
Property spruikers are under increasing scrutiny following the recent real estate boom, with calls for further regulation of the property industry to avoid investors being taken advantage of.
Lisa Montgomery, an independent personal finance consultant, told Smart Property Investment’s sister publication Mortgage Business that the property investment industry is in dire need of regulation to bring it into line with other sectors.
“But you look at the property investment industry, from a professional standards perspective: if I wanted to tomorrow, I could set up a website, call a seminar, get involved with a developer and pocket loads of money in my back pocket from unsuspecting investors. But I don’t need to meet professional standards to do that and position myself as an expert,” she said.
Ms Montgomery praised ASIC’s recent action against several high-profile property spruikers, although she raised concerns that it may be a case of too little, too late.
“There is no specific regulation for property spruikers; however, ASIC have them in their sights now and we’re seeing action being taken," she added.
“You could say it’s too little too late, but any action we can see from governments and regulators is absolutely welcome. I think government has a responsibility to be making more decisions here – and more targeted decisions – so that by our next boom, we do have regulation in place that consumers are protected by.”
Park Trent and ASIC have until 29 October to file submissions regarding the form of final orders.
According to Park Trent’s website, the company has 10 offices nationwide and has joint venture operations in China, New Zealand, the UK and the UAE.
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