Three major accounting bodies and the SMSF Association have pushed back against a proposal to introduce penalties for issuing incorrect accountants’ certificates used to verify wholesale investor status, arguing significant reform would be needed if they go ahead.
The opposition was outlined in a supplementary submission from Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants and SMSF Association that was made in response to evidence presented at a Treasury inquiry into the wholesale investor and client tests.
The submission specifically addressed an Australian Securities and Investments Commission (ASIC) proposal to introduce penalties for negligent or false issuance of accountants’ certificates, a move that is intended to curb misconduct.
The joint bodies maintained the view that accountants’ certificates should be removed, as stated in previous submissions, and noted more clarity would be required if the penalties were introduced.
“If the committee were to reject this recommendation and to propose that penalties should be imposed on accountants, as suggested by ASIC, then this area of the law must be significantly reformed and simplified so that accountants, product providers, financial advisers and investors can easily understand an accountant’s obligations and responsibilities,” the submission stated.
“We do not support an increase in ASIC remit in this respect. These certificates are not financial products or services and many accountants in public practice are not licensed to provide financial advice.
“In addition, when signing these certificates, accountants are offering an opinion about a client’s income and/or net worth. Accountants are not asked to offer an opinion about a client’s education, training or experience to be classed as a wholesale investor.
“Accountants without an Australian financial services licence cannot offer a view about a particular financial product and its suitability to a client’s circumstances.”
Additionally, the joint bodies raised concerns about potential conflicts of interest if financial advisers or product providers are the ones certifying clients as wholesale investors.
It recommended increasing the wealth thresholds used to determine wholesale investor status to help reduce the risk of misclassification, requiring clients to provide written acknowledgment when opting out of retail protections, and ensuring financial advisers adhere to ethical standards and meet minimum education requirements.
