The Australian Securities and Investments Commission (ASIC) today announced two class orders that clarify the category of wholesale clients in the Corporations Act 2001 (the Act), Class Order 04/150: Wholly-owned subsidiaries of professional investors to be treated as wholesale clients [CO 04/150] and Class Order 04/173: Qualified accountant - amendment [CO 04/173].

The class orders have been issued to clarify the regulatory requirements that apply to wholesale and retail clients, given the different treatment of each under the Act. As a general rule, lighter regulatory requirements are imposed where financial services are only provided to wholesale clients.

Wholly owned subsidiaries of professional investors

[CO 04/150] is a new class order that expands the category of wholesale clients to include wholly-owned subsidiaries of professional investors. This class order took effect on 2 March, 2004 and has been issued on an interim basis until 31 December 2005. The relief is interim to enable any review of the legislation in this area.

Under the Act, wholesale clients include persons who are professional investors including various financial institutions, listed entities and related bodies corporate of listed entities (such as subsidiaries).

‘ASIC’s interim relief means that financial services may be provided to the wholly-owned subsidiaries of professional investors as if they were wholesale clients, regardless of whether the subsidiaries meet the statutory definition of wholesale client’, ASIC Director of Regulatory Policy, Mr Mark Adams said.

‘The class order builds on the exemptions already in the Act, and has been made on the basis that wholly-owned subsidiaries of professional investors derive sufficient regulatory protection through the capacity of their parent’, he said.

The class order permits financial services providers who are only licensed to provide services to wholesale clients, to also provide those services to the wholly-owned subsidiaries of professional investors. For practical purposes, many companies carry on different aspects of their business through various wholly-owned subsidiaries.

Foreign Accountants

[CO 04/173] amends Class Order 01/1256: Qualified Accountant [CO 01/1256].

The amendment recognises certain foreign accountants as qualified accountants under the Act. Qualified accountants are able to give a certificate to allow an investor to be regarded as a wholesale client or sophisticated investor for the purposes of paragraphs 708(8)(c) and 761G(7)(c) the Act.

This class order also took effect on 2 March 2004. This relief is not interim.

This amending class order expands the scope of who may be a qualified accountant to include any member of a eligible foreign professional body (see below) who:

1. has at least three years of practical experience in accounting or auditing; and
2. is only providing a certificate for the purposes of paragraphs 708(8)(c) or 761G(7)(c) of the Act to a person who is resident in the same country (other than Australia) as that member.

In practical terms, the relief will mean that these foreign investors (who are in fact wholesale clients) may be able to more readily access financial services from Australian financial service providers who are licensed to provide financial services to only wholesale clients.

For the purposes of the foreign accountant’s class order, an eligible foreign professional body covers:

• the American Institute of Certified Public Accountants;
• Association of Certified Chartered Accountants (United Kingdom);
• Canadian Institute of Chartered Accountants;
• Institute of Chartered Accountants of New Zealand;
• The Institute of Chartered Accountants in England and Wales;
• The Institute of Chartered Accountants in Ireland; and
• The Institute of Chartered Accountants of Scotland.

Copies of class orders [04/150] and [04/173] can be obtained from ASIC’s Infoline by calling 1300 300 630 or emailing infoline@asic.gov.au or from the ASIC website at www.asic.gov.au.

End of release

Download a copy of the class orders:

Class Order [CO 04/150]: Wholly-owned subsidiaries of professional investors to be treated as wholesale clients

Class Order [CO 04/173]: Qualified accountant - amendment