The distinction between retail and wholesale (including professional and sophisticated) clients has become more important from a disclosure perspective as a result of ASIC's Information Sheet 99.
Information Sheet Number 99 states that a credit rating must not be disclosed in a manner that is intended to (or could reasonably be regarded as being intending to) influence a retail client in making a decision in relation to a particular financial product or class of financial products. This means that financial intermediaries (such as brokers, advisors and financial planners) will not be able to disclose the credit rating of products or issuers to retail clients. But they can provide that information to wholesale clients. This anomaly has arisen because since 1 January 2010 ASIC requires credit rating agencies (such as Standard & Poor's, Moody's and Fitch) to hold an Australian Financial Services Licence and to date the ratings agencies have only obtained licences with a wholesale client authorisation.
FIIG as a fixed income broker must comply with Information Sheet 99. So, it's important that you understand if you are a retail or wholesale client because it will affect the credit rating information that we are allowed to disclose you. To assist in this regard, we have provided definitions below.
Retail Client
Essentially, everyone is a retail client unless they satisfy one of the requirements to be classified as a wholesale client undersections 761G (5), (6) and (7) or section 761GA of the Corporations Act 2001 apply.
Wholesale Investors
Wholesale clients comprise sophisticated investors and professional investors under the Corporations Act 2001..
Professional Investor
A professional investor is defined as one or more of the following:
- a financial services licensee;
- a body regulated by APRA, other than a trustee of any of the following (within the meaning of the Superannuation Industry (Supervision) Act 1993):
- a superannuation fund;
- an approved deposit fund;
- a pooled superannuation fund
- a public sector superannuation scheme;
- a body registered under the Financial Corporations Act 1974;
- the trustee of:
- a superannuation fund;
- an approved deposit fund;
- a pooled superannuation trust; o
- 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 gross assets of at least $10 million (including any amount held by an associate or under a trust that the person manages);
- a listed entity or related body corporate of a listed entity;
- an exempt public authority;
- a body corporate or an unincorporated body that:
- carries on the business of investment in financial products, interests in land or other investments; an
- for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of section 82 of the Corporations Act 2001, 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 preceding paragraphs.
Sophisticated investor
A sophisticated investor is one or more of the following:
- a person or entity that has obtained an accountant's certificate dated no more than two years ago that the client:
- has net assets of at least $2.5 million; o
- has a gross income for each of the last two financial years of at least $250,000;
- a person or entity who invests where the purchase price of the product is at least $500,000.
Conclusion
So it's important to ascertain if you are a wholesale client and, if so, to inform FIIG so that we can ensure that you receive proper disclosure of credit ratings of products and issuers. If you're unsure, please request assistance from our team at FIIG.