ASIC Announcements

ASIC has made two important announcements over the past couple of days.

Misuse of Sophisticated Investor Certificates

Under financial services laws, there are many differences in the requirements a licensee must undertake in regard to a client that is deemed retail. One of the main disparities lies with the documentation provided to a retail client - for example, a Financial Services Guide, Product Disclosure Statement and Statement of Advice.

Under the Corporations Act 2001 (Cth) (“the Act”), a company who wishes to raise funds is required to provide a prospectus or other regulated disclosure documentation to a retail client. However, certain exemptions apply including for those clients who satisfy the wholesale definition, pursuant to the Act.

One such exemption relates to a person satisfying the wholesale criteria by virtue of their personal wealth - that is, they are deemed to be a sophisticated investor due to their financial acumen and nous. A qualified accountant (that is, one who is a member of one of the recognised accounting bodies) can provide a certification that the individual has net assets of at least $2.5 million or has a gross income for each of the past 2 years of at least $250,000. (This certificate must be no more than 6 months old).

ASIC has noted that in some recent cases, investors who received an accountant’s certificate indicating that they were wholesale, should not have done so. The result is that the client or investor is not afforded the general protections that would otherwise apply to a retail client or investor.

ASIC has indicated that it is having discussions with the appropriate accounting bodies in regard to this issue.

ASIC consults on new client money reporting rules

ASIC is considering additional rules for licensees that hold clients’ funds deemed to be derivative retail client money.

The new rules will impose record keeping, reconciliation and reporting requirements on those licensees who hold derivatives positions on behalf of retail clients. The reforms will prevent licensees from withdrawing clients’ funds (provided by retail derivative clients) and using these funds for certain purposes currently permitted under the Act.

One exemption would be if the client money is in regard to a derivative that is traded on a licensed market operator, such as the ASX 24.

It is also proposed that the reforms will also give ASIC the power to make new client money reporting rules to ensure greater transparency in relation to a licensee’s receipt and use of derivative retail client money.

ASIC has advised that it is seeking the new client money reforms to come into effect on 4 April 2018.

ASIC has announced that it is seeking feedback on the proposed rules which are documented in Consultation Paper 291 - Reporting Rules: Derivative Retail Client Money (“CP 291”).

You can download a copy of CP 291 by clicking here.


Should you have any queries about ASIC or other issues involving compliance, licensing, or corporate governance, please contact Jeremy Danon, director of Ariel & Associates Pty Ltd on (02) 8223 3355 or at