Key Parliamentary committee reopens sophisticated investor debate
A key Parliamentary Committee has ramped up its inquiry into the wholesale investor test.
After originally initiating the inquiry in March, last year, the Parliamentary Joint Committee on Corporations and Financial Services this week called for written submissions.
The terms of reference of the committee inquiry make clear that experience in overseas jurisdictions should be taken into account.
The committee review comes against the background of reports earlier this year that the Government was inclined towards raising the sophisticated and wholesale investor net assets threshold from the current $2.5 million to $4.5 million something which was later played down by Assistant Treasurer and Minister for Financial Services, Stephen Jones.
The inquiry terms of reference allow it to traverse a review of the current wholesale investor/client tests “including legal requirements, identification of all contexts in which the tests are relevant, the consequences of an investor/client meeting the relevant test, and the application of the tests in practice”.
The PJC inquiry comes in the wake of the Treasury review of the regulatory framework for managed investment schemes (MIS) which generated a broad consensus that the existing sophisticated investor thresholds had not kept pace with economic reality.
The Financial Advice Association of Australia pointed out that the thresholds had not been indexed since they commenced in 2001.
At the same time, Australian Financial Complaints Authority (AFCA) argued that the wholesale/sophisticated thresholds should be increased.
AFCA said that it did not believe that decisions around whether a client met the definition of a wholesale or sophisticated investor should “not be left to investor attestations and passive acceptance by the advice provider or RE”.
increasing the threshold would put more clients under the care of the incompetent ASIC, no thanks! Expect more levies to come with it