ASIC has just released Media Release 14.191 entitled ‘Statement on wholesale and retail investors and SMSFs’. The release provides welcome guidance on the previous vexed classification of SMSF trustees as wholesale or retail clients.
The thrust of the Media Release is that:
- if the financial service relates to a superannuation product, the $10 million net assets is the only applicable exception;
- if the financial service does not relate to a superannuation product, the usual wholesale client test applies (eg net assets $2.5 million/$500,000 investment value); and
- ASIC will not now treat every financial service provided to a superannuation fund trustee as relating to a superannuation product. Two examples given are:
- advice to a superannuation fund trustee about how to invest fund assets; and
- a superannuation fund trustee subscribing for financial products on behalf of an existing superannuation fund.
This guidance supports advice we have previously given to clients which pointed out that:
- a superannuation product is defined to mean a beneficial interest in the relevant superannuation entity,
- where issuers issue financial products to a superannuation fund trustee, the relevant financial service will ordinarily relate to that financial product and not a superannuation product,
- where advisers provide advice and the advice relates to the investment of fund assets/the fund’s investment strategy, this would also ordinarily not relate to a superannuation product, and
- a possible exception to 3 is where the advice relates to the investment of a member’s account balance, because it might then arguably ‘relate to a superannuation product’ (i.e. the beneficial interest held by the member).
ASIC also notes that its guidance represents effectively a no action position and would not affect any private rights of action that may be available to third parties.
While we note this comment and the uncertainty of the law we also note that, in our view, ASIC’s withdrawal of QFS 150 and guidance represents the correct interpretation of the law, although clearly clients will need to seek their own legal advice in relation to the specific circumstances they are dealing with.
ASIC lastly notes the desirability of a review of the test, presumably at a statutory level.