Wholesale Clients in Australia Receive New Regulations
The Australian Securities and Investments Commission announced new regulations for wholesale clients. This comes when traders and investors are still waiting for ASIC to implement their leverage restrictions on contracts-for-difference. These wholesale clientele now must work around two new sets of guidelines. With the new regulations created by Australia, the client won’t have access to the “Price & Value Test” going forward. This was a test maintained for wholesale clientele to identify the class of customers relating to the issued CFD.
The Australian investment community is different in comparison to Europe. Wholesale clientele act similarly to Professional Traders in the European Union. Subsequently, their range of investments is higher than the standard consumer. Even with their more powerful hold on the Australian market, these wholesale investors don’t receive the same protection rights provided to retail traders.
Before the implementation of these new guidelines, wholesale clientele could operate this test. It followed under the 2001 Corporations Act in the 716G sub-guidelines. It enabled any client exceeding a balance of $500,000.00 Australia Dollars to receive the wholesale title. Unfortunately, the new guidelines implemented by ASIC removes this capability in the legal framework of trading.
The Director of Traction Fintech in Australia, Sophie Gerber, spoke on the new guidelines. She stated: “The rationale behind the amendment appears to be that the notional value of AU$500,000 under a CFD could be achieved with a modest initial margin. Clients who are classified as wholesale are excluded from certain regulations under the Corporations Act, including issuing of disclosure documents including Product Disclosure Statement and Financial Services Guide; ability to lodge complaints with AFCA; ensuring staff dealing with clients hold appropriate RG 146 courses and the treatment of client money.”
Traders and Investors legally licensed under ASIC will have to review their wholesale clientele going forward. These reviews will determine if the wholesale investor in question evaluated their status with the “Price & Value Test.” These clients will be requested to alter their information to meet the new ASIC requirements.
Sophie Gerber finished her remarks by saying: “Where it is no longer appropriate that the client is classified as a wholesale investor. The licensee should inform the client of the reclassification, including issuing disclosure documentation and advising the client of his or her new customer protections. A reconciliation of client money should also immediately occur to ensure that client money which was previously classified as wholesale adheres to the rules for the treatment of retail client money.”