Financial Services Regulation update - Australian Government reviews retail / wholesale definitions

Corporate Advisory eBulletin – 14 February 2011

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The Federal Government has announced a review of the distinction between retail and wholesale clients under the Corporations Act 2001 (Cth).

The Government considers this is an opportune time to review the retail / wholesale distinction, largely as a result of problems with the definitions that became apparent during the global financial crisis.  Similar reviews are underway internationally.


Possible reforms

The options for reform are discussed in an Options Paper released by the Assistant Treasurer.  Broadly, the options are:

  1. Retaining the current system but updating it to reflect current conditions (possibly by way of an increased product value threshold, indexing the wealth and product value thresholds or excluding illiquid assets from the wealth threshold test).

  2. Removing the distinction between retail and wholesale clients so that all clients, except professional investors, receive protections and disclosures currently only afforded to retail clients.

  3. Introducing a subjective "sophisticated investor" test as the sole test based on the client's experience and ability to understand the product as the sole distinction.

  4. Take no action and maintain the existing tests and thresholds.  


Request for feedback and comments

The closing date for submissions is 25 February 2011. 

Lander & Rogers proposes to make a submission in response to the Options Paper and we invite you to submit your comments to Bill Brown or Jessica Zikman.  We are aware that many clients find it useful to have their views asserted without being so conspicuous (or taking the time) to submit them directly to Treasury.


Further information

Jackie Solakovski | Partner
+61 3 9269 9314

Jessica Zikman | Lawyer
+61 3 9269 9303

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