An area of controversy over the last 10 years has been the classification of a superannuation investor as either retail or wholesale.
If a financial service does not relate to a superannuation product, the general tests for determining whether the superannuation trustee is a retail or wholesale client can apply. For example, the trustee will be a wholesale client if a qualified accountant certifies that it has net assets of at least $2.5 million.
However, if a financial service does relate to a superannuation product, the general test cannot apply and the trustee will need to have net assets of at least $10 million.
As a result, the key question is whether a particular financial service, the provision of financial product advice, relates to a superannuation product or not.
In 2004, the Australian Securities and Investment Commission (ASIC) stated that a financial service would generally relate to a superannuation product where it was provided to a self-managed superannuation fund trustee. Therefore, in ASIC’s view, a superannuation trustee (including a SMSF trustee) needed to have net assets of at least $10 million in order to be qualified as wholesale.
Today, ASIC advised that they were taking a no-action position in relation to their controversial position on the treatment of trustees of superannuation funds. Whilst a no-action position from ASIC is not ideal in comparison to clearly drafted law, ASICs announcement is welcomed.
The outcome is that a trustee of wholesale fund is able to accept investments from trustees of superannuation funds (including SMSFs) if they meet the usual wholesale client tests without fear of ASIC pursuing the trustees based on a different interpretation of the law.
ASIC’s statement can be found here.