SMSFs accessing wholesale products subject to tests
Self-managed super funds (SMSF) will now have to adhere to the same eligibility tests as everyone else when determining whether an investor is a wholesale client or not, a law firm said.
It comes as the Australian Securities and Investments Commission (ASIC) recently announced it will relax its hold on SMSFs investing in wholesale products and make it easier to meet the eligibility test.
Townsend Lawyers said SMSFs will either have to meet one of six tests as laid out in one section of the Corporations Act 2001, or all of the tests as laid out in another section.
Commenting on ASIC's change of mind, Townsends principal Peter Townsend said: "It is somewhat curious that at the same time as ‘vested interests' proclaim that SMSFs are investing in dangerous products and should have their activities curtailed (which translates as: only being able to invest with those same vested interests), ASIC is choosing to give SMSFs access to wholesale investments, which don't necessarily have the same suite of protections as there might be for retail investments."
The tests include making sure the product price is over $500,000, product/service is used in connection with a business, the person has assets of more than $2.5 million and income of more than $250,000 for the last two years, or the person is a professional investor.
Alternatively, SMSFs will have to meet tests in section 761GA, namely that their financial adviser is licensed, the product is not super, insurance or RSA, the product is not used in connection with a business, the adviser tells the client they are satisfied the client is experienced in the products, and the client agrees to this in writing.
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