In this Funds Update for 14 February 2025:
- Parliamentary Committee releases inquiry report into wholesale investor and client tests
- ASIC consults on employee incentive class orders
- ASIC releases Financial advice update for February 2025
Parliamentary Committee releases inquiry report into wholesale investor and client tests
Following stakeholder consultation in 2024, the Parliamentary Joint Committee on Corporations and Financial Services (Committee) released its report in February 2025 into its inquiry into the wholesale investor and client tests, under sections 761G and 761GA of Chapter 7 of the Corporations Act 2001 (Cth) (Act). The report is available here.
We previously reported on the Committee’s inquiry here and here.
The Committee was not persuaded that the thresholds for the asset, income or product value limbs of the wholesale client test should be increased. The Committee considered that the proponents of increasing the thresholds had not identified any specific mischief which would be addressed by increasing the potential pool of wholesale investors in Australia. The Committee instead recommended that the government consider establishing a mechanism for periodic review of the operation of the wholesale investor and client tests, and that any such mechanism includes mandatory requirements for engagement and consultation with Australia's investment industry.
The Committee supported an overhaul of the sophisticated investor test to move towards more objective criteria and recommended that, subject to a period of stakeholder consultation, the government amend the Act to remove the subjective elements of the sophisticated investor test and introduce objective criteria relating to the knowledge and experience of the investor.
The Committee did not reach a settled view on an accounting-sector led proposal for the existing accountant’s certificate arrangements to be overhauled or abolished. However, the Committee encouraged the government to consider whether there is a need for a broader review of the legislation regulating wholesale and retail investors and the financial markets more broadly.
The release of the Committee’s report is expected to remove a barrier to the completion of the separate Treasury review into Managed Investment Schemes, which we reported on here.
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ASIC consults on employee incentive class orders
ASIC is seeking feedback on its proposal to remake two employee incentive class orders due to expire on 1 April 2025:
- Class Order [CO 14/1000] Employee incentive schemes: Listed bodies; and
- Class Order [CO 14/1001] Employee incentive schemes: Unlisted bodies.
ASIC is proposing to remake the exemptions for a period of five years. Submissions should be made by 5pm AEDT on Friday, 22 February 2025.
More information on the proposals can be found on ASIC’s website here.
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ASIC releases Financial advice update for February 2025
On 12 February 2025, ASIC released its Financial advice update, which covers all areas of financial advice regulation and includes a broad range of content relevant to Australian financial services (AFS) licensees who are advice licensees and financial advisers.
Some topics of interest to Funds include ASIC’s:
- review of compliance with professional standards and professional year programs;
- report and findings on internal dispute resolution data;
- report on the adoption of artificial intelligence by licensees; and
- update on reportable situations regime.
The ASIC media release detailing the update can be found here.
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Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.