Agents may face new rules

Real estate agents providing financial advice to clients will be regulated in line with other financial advisors if a report by the Australian Securities and Investment Commission gets the nod from the Federal government.

The regulatory regime applying to real estate agents does not provide the full range of safeguards to clients available to them when they receive investment advice from other investment advisors, the preliminary report found.

ASIC chairman, Alan Cameron said: “The regulatory regime covering real estate agents was not designed to regulate the provision of financial advice by real estate agents, especially individually tailored financial advice.”

“For example, investment advisors have an obligation to give securities recommendations ac-cording to the particular needs and circumstances of the investor.

“They must also disclose any commission or other benefits which they might receive by recommending a particular security and must disclose any conflict of interest”.

Currently, real estate agents are not subject to these requirements.

“This is significant, especially where the investors are retail investors and may not be as sophisticated as someone who deals in property all the time.

These people require all the protection that the law can provide and do not appear to be currently receiving that,” Mr Cameron said.

The laws governing real estate agents does not have specific requirements relating to the suitability of the advice or the disclosure of conflicts of interest.

Thus the law does not provide investor remedies for breaches of the advisory requirement.

Real estate agents giving financial advice are not required to possess training, qualifications and experience to ensure they are competent to give such advice.

The preliminary report stems from recommendations made by the Wallis Inquiry into Australia’s financial systems, which found a need to tighten regulations for real estate agents who give financial advice to bring them into line with regulations to which other financial advisors are subject.

A spokesman for the Real Estate Institute of WA said the industry had no major concerns over the preliminary report as it addresses some of the concerns REIWA has.

The spokesman said most of the advice given by real estate agents was incidental advice such as providing information on the history of capital growth, the rental income that is likely, and the prospect for future tenants.

ASIC is seeking comment from industry and the public before submitting a final report.

“ASIC is very keen to hear the views of anyone interested on our comparison of the regulatory regimes, and our suggestions for the future,” Mr Cameron said.

Comments and suggestions should be provided to ASIC by 27 August 1999.

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