Australia's corporate regulator has cancelled the registration of 440 self-managed superannuation fund auditors after they failed to meet competency standards.
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The Australian Securities and Investments Commission has also disqualified two self-managed super fund (SMSF) auditors.
The regulator said of the 440 auditors whose registration was cancelled, 373 did not attempt the exam and 67 did not pass the exam. Auditors were given up to two attempts to pass it. ASIC oversees the registration of thousands of SMSF auditors.
"As the SMSF sector continues to grow in popularity with Australian investors, it is critical that SMSF auditors play their key gatekeeping role," commissioner Greg Tanzer said.
"ASIC will continue to administer the registration process to assure Australians that SMSF auditors at least meet base standards of competency and expertise."
The regulator has also separately been looking at self-managed super fund seminars for evidence of misleading and deceptive conduct, following a sharp rise in promoters recommending that investors either set up or use an existing fund to invest in property.
The financial systems inquiry headed by former Commonwealth Bank boss David Murray suggested SMSFs not be allowed to leverage into property. It recommended banning limited recourse borrowing because of concerns it could, over time, increase risk in the financial system. The ban suggested would only apply to future sales, rather than forcing funds to unwind existing property holdings.
In the meantime both ASIC and the Australian Taxation Office will continue to monitor the sector.
SMSF auditors who have had their registrations cancelled can re-apply for registration if they have passed the competency exam in no more than two attempts over 12 months.
From July last year the law has required all auditors of SMSFs be registered with ASIC and meet minimum competency requirements.
ASIC approved 7038 of the SMSF auditor registration applications before July last year, with 1421 of these being registered on the condition that they passed the exam by July 1 this year.
ASIC said the SMSF auditors with an exam condition had audited fewer than 20 SMSFs in the 12 months prior to their application and that they were not registered company auditors.
Technical director at the SMSF Professionals' Association of Australia, Graeme Colley, said the industry body supports ASIC's move to weed out the auditors who were failing to meet the required standards.
"People should have done the exam and some didn't," he said. "These people exaggerated what they actually did - we support the actions of ASIC."
SMSFs represent the fastest growing segment of Australia's $1.8 trillion retirement savings sector.
Data from the Australian Taxation Office showed that there were 534,176 SMSFs in June this year, with over 1.01 million members.
SMSF trustees are seen as the most lucrative segment of the superannuation sector, with financial planners and accountants often vying aggressively for their business and fees. Around 40 per cent of trustees' assets are lumped in Australian shares, and 20 per cent in cash.
