Some online stockbrokers' accounts require customers to charge or pledge the assets of the fund as security for the payment of any debt owed to the stockbroker.
An SMSF which agrees to such a clause will be in a breach of superannuation law because SMSFs are not allowed to charge any of their assets.
In most cases this will be an accidental contravention, and so it is likely that the ATO will give the fund a chance to correct this before issuing a notice of non-compliance or taking action against the trustee.
I am advising all my clients to check their stockbroker's terms carefully for an offending clause of this type. Even some extremely well known and Australian based stockbrokers include this clause in their terms.
If you find such a clause in the terms and conditions of your SMSF's stockbroker I would suggest that you ask them to amend or delete it. In doing so you may wish to refer to Regulation 13.14 of the Superannuation Industry (Supervision) Regulations 1994 which (subject to exceptions which do not apply) prohibits an SMSF from giving a charge over, or in relation to, an asset of the fund (charge being widely defined as including a mortgage, lien or other encumbrance).
One way to deal with the offending clause is to ask the stockbroker to add the following clause to the terms and conditions:-
| To the extent that any provision in this agreement is in breach of regulation 13.14 of the Superannuation Industry (Supervision) Regulations 1994, that provision shall not apply between the parties to this agreement. |
I am publishing and keeping up to date a table showing the current situation with various stockbrokers here:
current situation table.
As time progresses I am hoping that all stockbrokers will offer Australian SMSFs non-offending terms to avoid this problem in future. If members of this forum would kindly keep me informed of any progress in this direction with their own broker and can update the table (contact details are just above the table if you follow the link above).
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