ASIC doesn’t trust AFSLs on sophisticated investor tests
The Australian Securities and Investments Commission (ASIC) has reinforced its concerns about allowing investors to self-certify as sophisticated investors.
As well, the regulator has reservations about the degree to which licensee can be trusted to be objective in making sophisticated investor assessments.
Answering questions on notice to from the Parliamentary Joint Committee on Corporations and Financial Services, ASIC questioned whether financial services licensees could be sufficiently trusted to assess the status of clients as sophisticated investors.
It said that while it acknowledged the benefit of the current tests, it noted that “the tests rely on an AFS licensee’s assessment of the investment experience of an investor, include a subjective element that might be open to abuse, and rely on an investor presenting evidence to demonstrate their previous experience in using financial services and investing in financial products”.
“There is an inherent conflict because the AFS licensee may benefit from the classification of the investor as being a ‘wholesale client’,” ASIC said in response to a question posed by the committee chair, Senator Deborah O’Neill.
It said the existing tests were not specific about the types of experience, qualifications or knowledge that would satisfy the reasonable grounds tests because they were principle-based requirements.
In doing so, ASIC cited both its own position and that of other submissions including that of the Financial Services Council (FSC) that the wholesale investor tests would benefit from the introduction of objective elements in the Corporations Act, such as requirements about the investor’s financial experience and qualifications.
“ASIC remains concerned with the option of allowing an investor to self-certify as a sophisticated investor because of the inherent difficulties in an investor assessing their own knowledge and experience, and the potential for abuse,” it said.
ASIC wants more Regulation & more Red Tape. Wow that’s surprising. NOT.
ASIC have Red Taped costed out 85% to 90% of Australians from Advice.
ASIC now aiming to Red Tape cost out another 5% or more.
So, regardless of the professionalisation of the industry, advisers still don’t have the ability to apply professional judgement? Much of what is wrong with the industry, that is trying to become a profession, is ASIC and its nanny state approach to regulation enforcement. It is beyond community expectations for it to slam the advice industry’s ability to do its job. Advisers are in front of clients and know them better than any outsider and more than is able to be demonstrated by reams of file notes. We need ASIC to step back and let us work with our clients.
The nanny state out of control again. Does ASIC actually think that all investors are idiots and that they need ASIC to protect them from making investment decisions?
Lets see if we can add more red tape and more regulations to advisors who are already drowning.
Much of the classification of investors into the sophisticated investor regime is the result of the current prescriptive and burdensome compliance regime for retail advice. Now here is ASIC wishing to make more prescriptive compliance. Too many lawyers creating too many rules for the sake of it.
But ASIC is happy for super funds to charge every member for personal advice via hidden intra fund commissions. No worries about the conflicts… this is truely a joke this lawyers in ASIC lawyers need some ethics training… this week ASIC are asking for my money for lawyers charging 20,000 a day but think advisers charging 300k for a years worth of access to an adviser is crazy and unaffordable.