In a statement released last week, ASIC said the recent Senate Economics References Committee’s final report on ASIC’s performance recommended the Australian government clarify the definitions of retail and wholesale investors.
“Given ongoing legal uncertainty about when a financial service relates to a superannuation product, ASIC has reviewed its interpretation of when the trustee of a superannuation fund will be classified as a retail client or a wholesale client,” the statement said.
“There are various tests for wholesale versus retail investors under the Corporations Act 2001. Wholesale clients may have access to a wider range of investments, but they do not enjoy all of the consumer protections that apply to retail clients.”
ASIC said if a financial service does not relate to a superannuation product, the general test for determining whether the trustee is a retail or wholesale client applies under the Corporations Act.
ASIC also said that under the general test the circumstances in which the trustee will be a wholesale client include if the trustee has a certificate from a qualified accountant stating they have net assets of $2.5 million or if the value of the investment is at least $500,000.
“ASIC's revised approach means that ASIC will not take action if the person providing the advice determines whether the trustee is a wholesale client based on the general test rather than applying the higher $10 million net asset test,” the statement said.
“ASIC acknowledges that legal uncertainty – particularly in relation to an issue as important as whether clients should receive the benefit of the retail client consumer protections – is undesirable and supports a review of the test to ensure that it is both clear and appropriate.”
