FD Legal supports the changes to Threshold Limits for Wholesale Investor and Wholesale Client Tests

The Parliamentary Joint Committee is conducting an inquiry into Threshold Limits for wholesale investor and wholesale client tests.  The inquiry is seeking submissions from the public to comment on the existing definition of the wholesale investor test for offers of securities and the wholesale client test for financial products and services.

Under the existing test the concept of wholesale investor/client (as opposed to sophisticated investor) deems certain investments as suitable for the client based on their financial circumstances without the need to give product disclosure statements or other disclosure documents.  Wholesale, as opposed to sophisticated investor, does not determine that the investor has an underlying level of investment knowledge or sophistication, just their financial position.  This, in our view, often confuses the problem.  A person with assets is deemed to understand the risks involved with investments regardless of the risk whereas a sophisticated investor is just that.  An investor who can make their own judgements about whether to make an investment and the risks involved.

It is our view the proposed changes to the wholesale investor test such as increases in income and net asset thresholds are welcomed.  However, the real issue is that too many unsophisticated wholesale investors (who meet the asset test) are being recommended investments which do not meet their goals, objectives or circumstances.   Consideration should be made to determine whether the test which should be applied is whether the person holds the level of sophistication in financial affairs to determine the risks associated with the investment.

If you are a wholesale investor who has suffered loss due to bad financial advice FD Legal is here to help.  Contact FD Legal on 1300 433 533 or enquiry@fdlegal.com.au to discuss your circumstances.