SMSFA calls for clear definition of wholesale investor prior to new FFSP rules
The SMSFA has called on the government to delay extending financial service licensing exemptions to foreign financial services providers (FFSPs) until there is a clear definition of a wholesale investor.
In a joint submission with CA ANZ, CPA Australia and the IPA on the exposure draft legislation to provide Australian financial service licensing exemptions to FFSPs, the SMSFA noted that under the proposed changes, FFSPs would be able to offer products to wholesale investors.
“We have examined the proposed changes in detail and have identified what we consider to be a significant issue,” the submission stated.
“The proposed changes allow FFSPs to offer products to so-called ‘wholesale investors’. It is well known that under Chapter 7 of the Corporations Act many consumer protections available to retail investors are not available to wholesale investors.
“Since the definition of wholesale investors was introduced in 2001, many Australians have been able to fall into that definition merely because of the increasing value of capital assets especially residential real estate and Australian listed equities.”
Acknowledging that the government’s Managed Investment Scheme Review (MIS Review) is currently reviewing parts of the definition of wholesale investors, the association and its peers said they will be proposing to the review that many people who are currently able to be defined as wholesale investors will cease to satisfy that definition.
“We note that the intended commencement date of the FFSP licensing exemptions is 1 April 2024. We are concerned that until modernised definitions of wholesale investors are legislated, there is an increased risk of consumer harm.
“The commencement date of these FFSP licensing exemptions should only be on or after the same date changes to the wholesale investor definition as proposed by the MIS Review will commence.”
Treasury released its consultation on AFSL exemptions for FFSPs in August. The consultation proposed replacing the previous exemptions with four new options, highlighting the government’s commitment to provide FFSPs with clarity around their regulatory status in Australia and proportionate pathways to enter Australia without holding a full AFSL.
