Lack of evidence sees ASIC lose wholesale investor | Australian Markets

ANALYSIS

The Parliamentary Joint Committee on Firms and Monetary Companies has delivered the Australian Securities and Investments Fee (ASIC) a loss on the wholesale/retail investor regime citing a lack of proof of investor hurt.

Actually, the committee’s last report pushed back on ASIC and different proponents of toughening up the delicate investor take a look at by noting that the results of inflation on who qualifies as a refined investor shouldn’t be, of itself, enough justification for altering the present regime.

The result represents a win for the investment sector, however the actual fact the committee additionally advisable the regime must be subject to a periodic review regime and that more goal standards must be utilized to the information and expertise of people earlier than they’re deemed “sophisticated” traders.

However on the coronary heart of the committee’s final place was “the lack of evidence of harm arising from current test thresholds”.

“…during the inquiry, the committee was not persuaded by the examples of investor harm identified by ASIC and other submitters as having been caused by the current settings of the test thresholds,” the ultimate committee report stated.

“First, the fact that so few examples were able to be cited did not provide sufficient evidence of significant or systemic harm arising from the current settings of the test thresholds per se. The committee considers that the paucity of examples in fact tends to support the view that the current test thresholds settings remain appropriate, notwithstanding the greater proportion of people meeting the test thresholds,” it stated.

“Second, legit questions have been raised concerning the relevance and extent to which the few examples cited truly demonstrated issues with the present take a look at threshold settings. The committee considers that the examples supplied weren’t in actual fact associated to issues arising from inexperienced or unsophisticated traders being incorrectly categorised due to the impact of inflation on the take a look at thresholds and struggling losses in reference to wholesale investments.

“In fact, these examples merely demonstrate a number of individual instances of incorrect and fraudulent classification of investors, in many cases involving retail rather than wholesale investors,” the report stated.

“The committee notes that increasing the test thresholds would have no impact on deliberately fraudulent misclassification of investors or on the regulation and effectiveness of consumer protections in the retail investment market.”

“Similarly, the committee was not persuaded by prima facie arguments that, relative to when the tests were first introduced, simply because the proportion of Australians that can qualify as wholesale investors has increased due to inflation there must therefore be a cohort of wholesale investors who are vulnerable and therefore unqualified to participate in wholesale markets.”