Squirrel Super to Pay $55,000 Penalty for False and Misleading Marketing

Squirrel Superannuation to pay a $55,000 penalty fee for false and misleading marketing on Self Managed Super Funds, says the Federal Court of Australia.

The Court found Squirrel distributed a brochure conveying misleading representations about residential property investment returns at a seminar and via email on about 9,420 occasions, between March 2015 to January 2019. Squirrel was found to have engaged in conduct that was misleading and deceptive or likely to mislead or deceive.

The Court found that the brochure, titled ‘How buying established residential property can supercharge 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.

ASIC issued two Infringement Notices to Squirrel regarding the same conduct in October 2018 which Squirrel failed to pay. ASIC then took the matter to the Federal Court in December 2020.

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”.

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 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.’

If you are a former client of Squirrel Super, and you are concerned that you may have suffered losses, we encourage you to telephone us at 1300 433 533 or email us at enquiry@fdlegal.com.au to discuss your situation and rights of redress.