1. Executive Summary
In Australian Securities and Investments Commission v R M Capital Pty Ltd (No 2) [2025] FCA 1634, Jackson J imposed civil penalties and remediation orders arising from failures involving conflicted remuneration received by an authorised representative and the AFSL holder’s failure to take reasonable steps to prevent it. The judgment completes the proceeding commenced in 2019 and should be read with Australian Securities and Investments Commission v R M Capital Pty Ltd [2024] FCA 151 (First Judgment), in which RM Capital was found to have contravened s 963F of the Corporations Act 2001 (Cth).
RM Capital was the AFSL holder. The SMSF Club Pty Ltd was its authorised representative. SMSF Club assisted clients to establish self-managed superannuation funds and acquire real property following referrals from Positive RealEstate Pty Ltd (PRE). Under a referral arrangement, PRE paid SMSF Club fees when referred clients established structures used to acquire property through PRE. The Court found that SMSF Club accepted conflicted remuneration on 52 occasions between November 2014 and July 2016, totalling $135,863.65 excluding GST.
RM Capital’s contravention was different but closely connected. Section 963F required the licensee to take reasonable steps to ensure its representatives did not accept conflicted remuneration. In the First Judgment, the Court found that RM Capital’s controls fell short of that requirement. In the penalty judgment, Jackson J characterised RM Capital’s state of mind as “grossly negligent”, while expressly declining to find dishonesty or recklessness.
The judgment is especially important because the compliance failure was not confined to historical systems. In assessing penalty and specific deterrence, the Court examined RM Capital’s later policies, training, file reviews and representative understanding. Jackson J remained concerned that the licensee’s current materials blurred the distinction between a general conflict of interest and the statutory prohibition on conflicted remuneration, and that some representatives continued to misunderstand the ban.
The Court imposed:
- $575,000 on RM Capital for its single s 963F contravention;
- $350,000 on SMSF Club for 52 contraventions of s 963G(1);
- orders requiring both entities to establish appropriate systems, policies and procedures and obtain independent expert verification;
- RM Capital to pay ASIC’s costs; and
- an agreed $270,000 payment by SMSF Club towards ASIC’s investigation costs.
For AFSL holders, the central lesson is that authorised representative supervision requires more than generic compliance policies, product lists, invoice visibility and contractual rights. Controls must be specifically designed to identify, prevent and remediate the regulatory risk in question, and the licensee must be able to demonstrate that those controls are understood, implemented and followed.
2. Citation & Context
| Item | Detail |
|---|---|
| Case | Australian Securities and Investments Commission v R M Capital Pty Ltd (No 2) [2025] FCA 1634 |
| Court | Federal Court of Australia |
| Judge | Jackson J |
| Judgment | 18 December 2025 |
| Proceeding | NSD 906 of 2019 |
| Plaintiff | Australian Securities and Investments Commission |
| First defendant | R M Capital Pty Ltd |
| Second defendant | The SMSF Club Pty Ltd |
| Earlier judgment | ASIC v R M Capital Pty Ltd [2024] FCA 151 |
| Principal provisions | Corporations Act 2001 (Cth) ss 963F, 963G, 1101B, 1317G |
| Outcome | Contraventions declared; penalties of $575,000 and $350,000; compliance remediation and independent expert orders |
The First Judgment determined RM Capital’s liability under s 963F. The No 2 judgment determined SMSF Club’s liability under s 963G and the relief to be imposed against both defendants. ASIC and SMSF Club had reached agreement about SMSF Club’s liability and proposed relief, whereas penalty against RM Capital remained contested.
3. Material Facts and Compliance Failure
SMSF Club carried on a business assisting consumers to establish SMSFs. During the relevant period, it operated as an authorised representative under RM Capital’s AFSL. Fifty-two individuals or couples referred by PRE used SMSFs established with SMSF Club’s assistance to acquire real property through PRE.
PRE paid SMSF Club referral fees under an arrangement that existed from at least August 2013. Individual benefits ranged from approximately $212 to more than $5,000. The existence of that payment arrangement was capable of influencing the financial product advice SMSF Club gave about establishing an SMSF and using it to acquire property.
The regulatory problem for RM Capital was not that it had no compliance machinery whatsoever. It had a compliance program, selected representatives based on education and character, conducted some training, maintained an approved product list and received remuneration payable to representatives. But those measures were insufficiently directed to the conflicted-remuneration prohibition.
Jackson J observed that RM Capital had taken virtually no meaningful steps specifically directed to s 963F. Its dedicated policy remained in draft and was materially incorrect; relevant training was not effectively delivered to SMSF Club; monitoring was sporadic; and there was no effective ongoing process for identifying new remuneration arrangements. This was despite an obvious need to examine the PRE referral arrangement, including an indication that SMSF Club itself understood the payment could resemble a “kick back”.
The failure was therefore not simply a defective document. It was a supervision architecture problem: policies, training, representative knowledge, new-business approval, remuneration monitoring and escalation did not operate together to identify and prevent the prohibited benefit.
4. Contraventions
| Entity | Act | Section | Obligation | Conduct | Count | Finding |
|---|---|---|---|---|---|---|
| RM Capital | Corporations Act 2001 | s 963F | Take reasonable steps to ensure representatives do not accept conflicted remuneration | Inadequate policies, training, monitoring and supervision concerning SMSF Club and the PRE referral arrangement | 1 | Contravened |
| SMSF Club | Corporations Act 2001 | s 963G(1) | Representative must not accept conflicted remuneration | Accepted referral benefits from PRE in connection with financial product advice | 52 | Contravened |
RM Capital’s contravention ran from August 2013 to August 2016. SMSF Club’s 52 contraventions occurred between 18 November 2014 and 29 July 2016.
The distinction is operationally important. Section 963G directly prohibits the representative from accepting conflicted remuneration. Section 963F places a separate supervisory obligation on the licensee to take reasonable steps to prevent representatives from doing so. A licensee can therefore contravene its own obligation because its prevention and supervision framework is inadequate, even though the prohibited payments are received by another entity.
5. Key Legal Principles
“Reasonable steps” requires risk-specific controls
The First Judgment was the first judicial consideration of s 963F. It confirmed that there is no universal checklist of actions that will satisfy the obligation. What amounts to reasonable steps depends on the licensee’s circumstances, including the nature of its representative network and the risks presented by particular arrangements.
The critical compliance point is that broad control capacity is insufficient. RM Capital had contractual power over representatives, an approved product list and remuneration visibility, but those measures did not operate effectively to identify and prevent the conflicted-remuneration risk.
A reasonable-steps framework should therefore ask not merely whether a control exists, but whether the control is designed to detect the particular legal risk and whether evidence shows that it actually operates.
Generic conflict management is not the same as the conflicted-remuneration ban
One of the strongest findings concerned the continuing tendency to blur conflicts of interest with conflicted remuneration.
RM Capital’s later policy contained wording capable of suggesting that the statutory prohibition applied only where personal advice was provided. The Court held that this was incorrect and potentially misleading to authorised representatives. It also identified ambiguity around client consent and disclosure.
This distinction matters because conflicted remuneration is a statutory prohibition. It cannot necessarily be made lawful merely because a conflict has been disclosed or a client has consented.
Compliance material should therefore identify separately:
- conflicts of interest requiring identification and management;
- benefits excluded by statute from the conflicted-remuneration prohibition; and
- remuneration that is prohibited and cannot be cured through disclosure alone.
Compliance culture is independently relevant to penalty
Jackson J rejected the proposition that considering deficient compliance culture amounted to double counting where the contravention itself involved inadequate preventive measures.
The Court distinguished between the contravention—failure to take reasonable steps—and the broader organisational causes of that failure. RM Capital’s lack of a meaningful compliance culture was relevant because it increased the need for both specific and general deterrence.
For governance teams, this is significant. A compliance culture is not established merely because policies, outsourced compliance providers or audit activities exist. The Court looked at whether deficiencies were identified, followed up and corrected.
Historical remediation does not necessarily establish current compliance
The penalty judgment considered RM Capital’s conduct well after the original contravention.
Representative file reviews between 2021 and 2023 showed vague or incorrect understandings of conflicted remuneration. The Court found no clear evidence that those misunderstandings had produced corrective education.
The practical implication is that remediation requires evidence of effectiveness. Producing a revised policy does not establish that representatives understand it, nor that the business applies it consistently.
Civil penalty is principally about deterrence
The Court applied the established principle that a civil penalty should carry enough “sting” to achieve general and specific deterrence, without exceeding what is necessary and becoming oppressive.
RM Capital’s modest size was relevant, but the Court was not persuaded that the company lacked access to financial resources sufficient to pay a significant penalty. General deterrence therefore retained substantial weight.
6. Orders, Penalties and Remedies
| Entity | Order / Remedy | Legal Basis | Amount / Scope |
|---|---|---|---|
| RM Capital | Pecuniary penalty | s 1317G | $575,000 |
| RM Capital | Compliance remediation | s 1101B(1)(a)(i) | Appropriate systems, policies and procedures addressing representative compliance with s 963G |
| RM Capital | Independent review | s 1101B | Independent expert report to ASIC within six months |
| RM Capital | Costs | Court order | ASIC’s costs, agreed or assessed |
| SMSF Club | Pecuniary penalty | s 1317G | $350,000 |
| SMSF Club | Compliance remediation | s 1101B(1)(a)(i) | Systems, policies and procedures ensuring compliance with s 963G |
| SMSF Club | Independent review | s 1101B | Independent expert report to ASIC within six months |
| SMSF Club | Investigation costs | ASIC Act s 91 | $270,000 agreed contribution |
| SMSF Club | Court costs | — | No order as between ASIC and SMSF Club |
The maximum penalty applicable to RM Capital’s single contravention was $1 million. ASIC sought $650,000. Jackson J ultimately imposed $575,000 after considering the seriousness of the contravention, compliance culture, deterrence, financial position, absence of demonstrated customer loss and the independent remediation order.
For SMSF Club, the Court accepted the agreed $350,000 penalty. The 52 payments were treated as sufficiently connected to apply the course-of-conduct principle because they arose from the same referral arrangement.
7. Relevance for Licensees, Advisers and Responsible Managers
The combined judgments support several practical propositions.
Authorised representative supervision must examine commercial arrangements, not only advice files. Referral agreements, introducer arrangements and third-party payment streams may create regulatory exposure before an advice file is reviewed.
Contractual powers are not controls unless exercised. A licensee may reserve broad rights to approve products, inspect conduct or terminate representatives, but those clauses do not by themselves establish reasonable supervision.
Remuneration data must be analysed for regulatory purpose. Seeing payments passing through the licensee is not enough. Monitoring should ask why the payment exists, who provides it, what conduct triggers it and whether it could influence advice.
Policies need legal precision. Compliance documents that merge conflicts of interest and conflicted remuneration can create rather than mitigate risk.
Training effectiveness needs evidence. Attendance records alone do not demonstrate understanding. Testing, file review findings and remediation should be linked.
Outsourcing does not displace licensee accountability. Reliance on external compliance providers will not protect the licensee where the resulting framework is ineffective.
8. Risk Management & Compliance Recommendations
| Audience | Control Type | Legal Rationale | Risk Indicator | Practical Control |
|---|---|---|---|---|
| Board / Responsible Managers | Governance | s 963F licensee obligation | Third-party remuneration in AR network | Quarterly remuneration-risk dashboard |
| AR Governance | Preventative | Prevent prohibited benefits | New referral / introducer agreement | Pre-approval and legal assessment of all third-party arrangements |
| Finance | Detective | Payment visibility | Non-client revenue or referral fees | Payment coding and automated exception reporting |
| Compliance | Detective | Reasonable steps | Representatives receiving external benefits | Periodic remuneration attestations reconciled to financial records |
| Training | Preventative | Correct legal understanding | Confusion between conflicts and conflicted remuneration | Competency testing using practical scenarios |
| Advice Monitoring | Detective | Benefit may influence advice | Repeated advice leading to same third party | Thematic advice and referral reviews |
| Policy Governance | Preventative | Accurate regulatory guidance | Statements relying on disclosure or consent | Legal review of policy wording before issue |
| Responsible Managers | Corrective | Identified misunderstanding | Audit/file review reveals wrong interpretation | Mandatory remediation with closure evidence |
| Internal Audit | Governance | Effectiveness of control framework | Repeated historical findings | End-to-end assurance over payment, advice and referral controls |
9. Regulatory and Governance Significance
The most important aspect of RM Capital (No 2) is that the Court looked beyond the historical contravention and assessed whether the licensee had actually learned from it.
RM Capital had improved its framework. It had adopted a policy, introduced quarterly representative declarations and implemented additional controls. But the Court remained concerned about inaccurate policy language, unclear evidence of dissemination, continuing representative misunderstandings and limited evidence of effective training.
That is a particularly useful governance lesson for remediation programs. A remediation project should not be considered complete when:
- the policy has been rewritten;
- a training deck has been distributed; or
- an attestation form has been created.
The relevant question is whether those controls have changed behaviour and produced reliable compliance outcomes.
The judgment also reinforces the distinct governance responsibility attached to an AFSL holder. In considering parity between the penalties, Jackson J observed that the statutory scheme places responsibility on licensees to choose and supervise authorised representatives so as to reduce the risk of contraventions. That supervisory position justified a higher level of seriousness for the licensee’s failure, notwithstanding SMSF Club’s greater number of direct contraventions.
10. Recommended Next Steps
Licensees with authorised representative networks should consider:
- Create a register of all third-party commercial arrangements involving representatives, including referral, lead-generation, sponsorship, marketing, property, platform and product-provider payments.
- Require pre-approval of external remuneration. No representative should enter or renew a third-party payment arrangement until Compliance or Legal has assessed it against the conflicted-remuneration provisions.
- Reconcile declarations to transaction data. Representative attestations should be tested against invoices, bank payments, commission systems and external provider data rather than accepted at face value.
- Separate conflict-management and conflicted-remuneration policies. Cross-reference them where necessary, but make the legal distinction explicit.
- Review training for prohibited “cure” language. Remove any suggestion that disclosure or client consent automatically resolves prohibited remuneration.
- Introduce scenario-based competency testing. Require representatives and supervisors to demonstrate that they can identify conflicted remuneration in realistic referral and payment arrangements.
- Escalate repeat knowledge failures. Where file reviews or audits identify misunderstanding, require documented corrective action and verify closure.
- Test the current framework independently. An assurance review should trace a sample of real payments from source through representative arrangement, advice conduct, approval and monitoring.
11. Referenced Cases and Source Position
Australian Securities and Investments Commission v R M Capital Pty Ltd [2024] FCA 151 — liability judgment; first judicial consideration of the s 963F obligation to take reasonable steps to ensure representatives do not accept conflicted remuneration.
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 274 CLR 450 — deterrence as the principal purpose of civil penalties and proportionality between deterrence and oppressive severity — applied at [27]–[30].
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 — approach to agreed civil penalties — applied at [146]–[147].
Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 — course-of-conduct principle — applied at [148].
Primary source: Australian Securities and Investments Commission v R M Capital Pty Ltd (No 2) [2025] FCA 1634, Jackson J, 18 December 2025.