WHOLESALE CLIENTS NON CORRELATED CAPITAL

Transcription

1 NON CORRELATED CAPITAL Fund and Investment Management WHOLESALE CLIENTS Whether you're dealing with retail or wholesale clients is important. Financial services providers must generally give retail clients extra information, such as the Financial Services Guide and the Product Disclosure Statement. Retail clients also have extra protections such as compensation and complaint handling procedures. How is the distinction between retail and wholesale clients made? There's a presumption in the legislation that a financial product or a financial service is being provided to a retail client. However section 761G of the Act outlines exceptions where the presumption may not apply, because of either the type of product or the type of client. General insurance There are special provisions that determine whether a person provided with general insurance is a retail client or a wholesale client. See section 761G(5). Superannuation and RSA products Superannuation and retirement savings accounts products, and services relating to those products, are always taken to be provided to a person as a retail client unless the person is: The trustee of a superannuation fund, an approved deposit fund, a pooled superannuation trust or a public sector superannuation scheme that has net assets of at least $10 million; or An RSA provider. Other financial products For the remaining financial products there are four exceptions to the presumption that the client is a retail client: 1. Product value test Where the price of the financial product (or the value of the financial product to which a financial service relates) is greater than the prescribed amount, which is $500,000 in most cases. 2. Business test A business will be a retail client if it employs less than: 100 people, if the business is or includes the manufacture of goods; or 20 people, in all other cases. 3. Individual wealth test An individual is regarded as a wholesale client if a qualified accountant certifies that the person has: Net assets of at least $2.5 million; or Gross income for each of the last two financial years of at least $250,000. This exception only applies where the product or service isn't provided for use in a business. The accountant's certificate must not be more than 2 years old. Section 9 defines a qualified accountant.

2 Positive Theta Fund Wholesale Definition 2 Typically the term sophisticated investor is used for clients being provided advice with regard to debt or shares, whilst the term wholesale client/investor is used for other financial product recommendations. See the section titled Determining net assets or gross income for more information. 4. Professional investors This exception is based on the fundraising disclosure exemption in the pre-fsr Corporations Act. The exception covers: Financial services licensees; Bodies regulated by APRA other than: (i) A superannuation fund (ii) An approved deposit fund (iii) A pooled superannuation trust (iv) A public sector superannuation scheme Bodies registered under the Financial Corporations Act 1974; The Trustee of: (i) A superannuation fund; or (ii) An approved deposit funds; or (iii) A pooled superannuation trusts; or (iv) A public sector superannuation scheme. Within the meaning of the Superannuation Industry (Supervision) Act 1993 and the fund, trust or scheme has net assets of at least $10 million; A person or entity who controls at least $10 million; Listed entities and their related bodies corporate; Exempt public authorities; A body corporate, or an unincorporated body that: (i) Carries on a business of investment in financial products, interests in land or other investments, and (ii) For those purposes, invests funds received (directly or indirectly) following an offer to the public Within the meaning of section 82 of the Act, the terms of which provided for the funds subscribed to be invested for those purposes; A Foreign entity that if established or incorporated in Australia, would be covered by one of the above. Additional obligations for Financial Services Licensees Section 761GA of the Act states that a financial product, or a financial service in relation to a financial product, is not provided by one person to another person as a retail client if: (a) The first person (the Licensee) is a financial services licensee; and (b) The financial product is not a general insurance product, a superannuation product or an RSA product; and (c) The financial product or service is not provided for use in connection with a business; and (d) The licensee is satisfied on reasonable grounds that the other person (the client) has previous experience in using financial services and investing in financial products that allows the client to assess: (i) The merits of the product or service; and (ii) The value of the product or service; and (iii) The risks associated with holding the product; and (iv) The client s own information needs; and (v) The adequacy of the information given by the licensee and the product issuer; and (e) The licensee gives the client before, or at the time when, the product or advice is provided a written statement of the licensee s reasons for being satisfied as to those matters; and

3 Positive Theta Fund Wholesale Definition 3 (f) The client signs a written acknowledgement before, or at the time when, the product or service is provided that: (i) The licensee has not given the client a Product Disclosure Statement; and (ii) The licensee has not given the client any other document that would be required to be given to the client under this Chapter if the product or service were provided to the client as a retail client; and (iii) The licensee does not have any other obligation to the client under this Chapter that the licensee would have if the product or service were provided to the client as a retail client. See appendix 1 for the relevant form to assist in meeting the above obligations. Determining net assets or gross income The determination of the client s net assets or gross income is firstly dependent on whether the client is to be offered debt or shares: (a) Debt or shares To qualify as a sophisticated investor the guidelines in Chapter 6D of the Act are used to determine the clients net assets and gross income; other wise (b) Financial products (other than insurance, superannuation or a RSA product or service) To qualify as a wholesale clien the guidelines in Chapter 7 of the Act are to be used to determine the clients net assets and gross income. Additional considerations for wholesale clients: In determining the net assets of a person, the net assets of a company or trust controlled by the person may be included; and In determining the gross income of a person, the gross income of a company or trust controlled by the person may be included. Therefore, assets or income of a trust or company controlled by an investor can be aggregated with the assets or income owned or received by the investor directly. Additional considerations for sophisticated investors: The above provisions for a wholesale client do not apply. In determining if someone is a sophisticated investor you may only include the value of their shares in that company towards their net asset position or dividends for the purposes of gross income. For wholesale clients, the above can be interpreted as follows: Individuals who satisfy the net assets and gross income requirement could be treated as a wholesale investor; An individual, who is also a trustee of a trust and/or a director of a company, that satisfy the net assets and gross income requirement as a group can be treated as a wholesale investor; A husband and wife, who satisfies the net assets and gross income requirement as a couple could be treated as a wholesale investor when investments are made in joint names; and Where only the husband satisfies the net assets and gross income requirement, the wife should be treated as a retail client when investments are made in her name. The only exception to this is when the investment is made under the wife's name but controlled by the husband. Control is further defined in s.50aa. For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies. See appendix 2 and 3 for the relevant Accountants Certificate forms.

4 Positive Theta Fund Wholesale Definition 4 WHOLESALE CLIENT ACKNOWLEDGEMENT Appendix 1. Having conducted due diligence <insert name of licensee> is satisfied on reasonable grounds that <insert the client s name> has previous experience in using financial services and investing in financial products that allows <insert the client s name> to assess: The merits of the product or service; and The value of the product or service; and The risks associated with holding the product; and <insert the client s name> own information needs; and The adequacy of the information given by <insert name of Licensee> and the product issuer. The reasons for this are: <insert the reasons for being satisfied that the client has the necessary experience> <insert representative details> Signature:... Client declaration: I declare that: The licensee has not provided me with a Product Disclosure Statement; and The licensee has not given me any other document that would be required to be given to me under Chapter 7 of the Corporations Act if the product or service were provided to me as a retail client; and The licensee does not have any other obligation to me under this Chapter that the licensee would have if the product or service were provided to me as a retail client. <insert client details> Signature:... Date:.../.../...

5 Positive Theta Fund Wholesale Definition 5 ACCOUNTANTS CERTIFICATE Appendix 2. Certificate issued under section 761(7)(c) of the Corporations Act (2001) For the issue of financial products (other than insurance, superannuation or a RSA product or service). Not applicable for the issue of debt or shares. To <insert Licensee name> I <insert accountants name> of <insert accountancy firm details> certify as follows: 1. I am a qualified accountant for the purpose of the Corporations Act (2001) Commonwealth: A member of the Australian Society of Certified Practicing Accountants who is entitled to use any of the post-nominal s: CPA or FCPA. A member of the Institute of Chartered Accountants in Australia who is entitled to use any of the post-nominal s: CA, ACA or FCA. A member of the National Institute of Accountants who is entitled to use any of the post-nominal s: PNA, FPNA, MINA or FINA. 2. I am giving this certificate in accordance with section 761(7)(c) of the Corporations Act at the request of and with reference to <insert client s full name>. 3. Having reviewed the financial position of the person named in paragraph 2, I certify that the person has: Net assets of at least $2.5 million, or A gross income for each of the last two financial years of at least $250,000 a year. Signed... Name <insert accountants name> Date:... Certificate is valid for two years from the above date.

6 Positive Theta Fund Wholesale Definition 6 ACCOUNTANTS CERTIFICATE Certificate issued under section 708(8)(c) of the Corporations Act (2001) Applicable to the issue of debt or shares Appendix 3. To <insert Licensee name> I <insert accountants name> of <insert accountancy firm details> certify as follows: 4. I am a qualified accountant for the purpose of the Corporations Act (2001) Commonwealth: A member of the Australian Society of Certified Practicing Accountants who is entitled to use any of the post-nominal s: CPA or FCPA. A member of the Institute of Chartered Accountants in Australia who is entitled to use any of the post-nominal s: CA, ACA or FCA. A member of the National Institute of Accountants who is entitled to use any of the post-nominal s: PNA, FPNA, MINA or FINA. 5. I am giving this certificate in accordance with section 708(8)(c) of the Corporations Act at the request of and with reference to <insert client s full name>. 6. Having reviewed the financial position of the person named in paragraph 2, I certify that the person has: Net assets of at least $2.5 million, or A gross income for each of the last two financial years of at least $250,000 a year. Signed... Name <insert accountants name> Date:... Certificate is valid for two years from the above date

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