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The Australian Corporations Act 2001 (Cth) requires persons wishing to purchase securities or financial products to Requires us to provide a regulated disclosure statement, such as a disclosure statement or prospectus. .
There are certain exceptions. If a person is a “sophisticated investor”, they are not required to disclose based on certain income, value or asset criteria. Safeguards are in place to protect retail investors and ensure that they receive appropriate advice about terms and risks.
Current thresholds include:
- A person who is offered securities for a price paid of at least AU$500,000 (merchandise value test)
- Those who have a net worth of at least A$2.5 million (wealth test)
- Those whose gross income in each of the last two financial years is AU$250,000 or more per year (gross income test)
These thresholds were published in the Companies Act in 2001 but have not been indexed since then. The Australian Securities and Investments Commission (ASIC) claims this meant investors with limited investment experience or knowledge were able to access investments without an appropriate level of protection.
The proposed increase means the threshold for the product value test will rise from AU$500,000 to AU$900,000. The net worth test threshold will increase from A$2.5 million to approximately A$4.5 million. and the threshold for the gross income test will increase from A$250,000 per year for the past two financial years to A$450,000 per year for the same period. From now on, the standard value will be adjusted annually to take inflation into account.
ASIC’s proposals were included in the response to the Treasury’s consultation on the review of the regulatory framework for managed investment schemes.
Does it inhibit investment desire?
The proposed increase has been criticized for cutting off investment in startups while doing little to protect investors. Critics say that blocking access to certain financial products deprives people of access who understand the risks present in such investments.
A petition launched by an angel investor group asking the government to reconsider has gathered over 1,000 signatures. “Start-up companies, the heart of innovation, rely heavily on early-stage catalyst funding to grow,” the petition’s supporters said. These proposed changes have increased thresholds and risk constraining the growth of our vibrant startup ecosystem. ”
Instead, the group proposes that a certification process overseen by ASIC is needed to ensure that knowledgeable individuals in the start-up space can access investment opportunities without putting up unnecessary barriers.
far ahead
Despite opposition from multiple stakeholders, financial standards are likely to be raised, and the increases will apply not only to the sophisticated investor test but also to the “wholesale customer” test under Chapter 7. This is seen by the regulator as positive for the proper functioning of Australia’s financial services market, by aligning the two regimes.
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