The provision of licensing exemptions to foreign financial services providers (FFSP) should be delayed until a final decision is made regarding the definition of a wholesale investor, according to a joint submission to Treasury by the SMSF Association and three accounting bodies.
The SMSF industry body, Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants made the call in the submission to Treasury as part of industry feedback on draft legislation that would provide an exemption from the requirement to hold an Australian financial services licence for people regulated by comparable regulators and that provide financial services to wholesale clients.
Noting that under this change FFSPs would be able to offer products to wholesale investors, the four bodies stated they had identified a “significant issue” that could cause consumer harm.
“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,” the submission said.
“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.
“We note that the government’s managed investment scheme (MIS) review is reviewing parts of the definition of wholesale investors. We will be proposing to the MIS review that many people who are currently able to be defined as wholesale investors will cease to satisfy that definition.”
The submission stated that based on this review, the definition and exemption commencement dates should be aligned.
“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,” it said.
“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.”
