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Platforms should be able to certify sophisticated investors – law firm

Mike Taylor3 June 2024
Green wholesale ball amid retail squares

Wealth platforms should be able to certify whether investors exceed the income threshold necessary to be deemed a sophisticated investor, according to law firm, Corrs Chambers Westgarth.

As well, the law firm has argued that self-managed superannuation funds (SMSFs) should be considered wholesale clients along with at least half of the individual directors of tat fund.

In a submission filed with the Parliamentary Joint Committee on Corporations and Financial Services, Corrs Chamber Westgarth has argued that the specific requirement for ‘accountant’ certification of clients as wholesale clients under the net assets or gross income tests “is unnecessarily narrow”.

It has recommended that, instead, options for certification should be expanded to permit:

  • employer certification of income;
  • issuer self-certification by reliance on copies of the most recent tax returns (or notice of assessment) evidencing income exceeding the $250,000 income threshold amount; or
  • certification from a wealth platform that the investor’s investible wealth held on the platform exceeds the threshold amount.

Where SMSFs are concerned the Corrs submission said that there was a need for clarity when it comes to the position of self-managed superannuation funds, being a substantial part of the investor universe.

“We recommend that section 761G(6) be amended to definitively provide that:

  • if an ‘individual’ wholesale client is a trustee of a self-managed superannuation fund (SMSF); or
  • where the SMSF has a corporate trustee, at least half of the (individual) directors are wholesale clients,

the ‘SMSF’ is to be considered a wholesale client when being pre-qualified for investment into a financial product.

If an individual otherwise qualifies as a wholesale client in their own right, it should follow that their SMSF is also a wholesale client, in particular, given it is subject to the same directing mind. The position under current law is ambiguous,” the submission said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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