Dealing with FASEA requirements

Wholesale vs sophisticated investors

Before January 2020, a retail client that passed an individual wealth test could receive a two-year certificate from their accountant that would enable them to be classed as a 708 wholesale investor.

However, in light of the Guidance Note to the FASEA Code of Ethics, a ’wholesale’ investor is no longer considered wholesale unless they are also ‘sophisticated’. Advisers need to assess whether their wholesale investor who once held just an accountant’s certificate proving wealth is, in fact, a sophisticated adviser and that decision is determined on the investor’s skills, knowledge and expertise.

As a result, an investor who was considered to be wholesale is now considered to be a retail investor who holds a certificate, until it can be proven that they are a sophisticated investor. Until such time, they fall under retail compliance obligations. 

This distinction is extremely important as Australian law is different for ‘wholesale’ and ‘retail’ investors.

Retail clients have a much higher level of protection in the financial advice space than do either ‘wholesale’ or ‘sophisticated’ investors. At the same time, investors that are classified as wholesale are allowed to participate in more complex products and investment opportunities based on their expertise, desire and knowledge. As a result, the compliance obligations and advice process differ substantially. The compliance obligations are reduced for wholesale investors as the investor is considered to have expertise and knowledge.

The change in approach introduced by the Guidance Note to the Code of Ethics significantly increases the need for accurately determining the true profile of investors who hold an accountant’s certificate.

Complii’s latest development allows advisers to electronically assess whether their wholesale investor who holds an accountant’s certificate proving wealth is, in fact, sophisticated. It is highly customisable per licensee based on their understanding and action in relation to the new regulation. 

FASEA requirements for CPD

The FASEA requirement for 40 hours per annum of CPD ushers in the necessity to ensure that advisers and all staff can manage and maintain their CPD requirements. Beyond financial planners, there is also the need for brokers, dealers and the securities industry to have access to relevant CPD material.

There are frequently barriers to professional development as challenges arise with access to a variety of news, podcasts, and webinars. Access to rich content is a key component of good professional development and needs to be incorporated into a daily routine in a seamless fashion. And monitoring and reporting CPD points as part of this routine is also essential.

At the end of 2019 Complii acquired an E-Learning and CPD platform. The platform itself has been built to meet FASEA standards so that advisers and all staff can manage their CPD requirements in line with FASEA. The unique build of the system means that each participant has their own personalised training plan, allowing management of training and learning modules to align with the staff member’s specific requirements. For example, if you are an adviser that is not subject to FASEA, then it will not be included in your training plan.

The platform includes an extensive library of E-Learning and CPD material for the broker/dealer/securities-specific industry. Through the online portal, users can access industry-specific content provided by reputable companies such as the Compliance professionals at Mintegrity, Deakin University, IFA and Money Management.

These enhancements and additions mean that ethical standards and guidelines are followed extensively throughout Complii’s processes and systems. Financial firms have complete transparency and insight into their professionals’ compliance with obligations, removing much of the administrative burden and crosschecking normally associated with compliance and professional development.

Allison Sarich can be contacted on 0488 327 688 or by email at info@complii.com.au

 

This article was published in Stockbroker's Monthly: March 2020 edition which can be accessed here: http://bit.ly/2Ts6sD3