Retail and sophisticated investor divide crucial in post-Murray world

The distinction between retail and sophisticated investor will become even more crucial if the Federal Government adopts key recommendations of the Murray Inquiry, according to the head of Australia’s leading online sophisticated investor registry.

Sophisticated Access founder, Peta Tilse, says the Financial System Inquiry’s blueprint for the next few decades focuses on the fair treatment of consumers by financial product issuers and distributors.

Tilse says a key to ‘fair treatment’ is a clearer distinction between which investors are retail and which are sophisticated (or wholesale). “If the Government adopts the recommendations in the Murray Report, it is going to be even more critical for financial product providers and distributors to distinguish between the different investor types,” Tilse says.

“Getting this wrong means the consumer may not be getting the right levels of disclosure, or access to financial products. These issues have been at the core of some of the recent advisory scandals, and very costly to all parties involved.”

Sophisticated investors receive priority access to institutional deals including pre-IPO offers, private placements, property syndicates and structured investment products. They can also participate in new peer to peer lending models and crowd funding initiatives but they lose retail investor disclosure protections.

Investor Certificates form the heart of sophisticated investor compliance. To become a sophisticated investor, the Corporations Act requires an investor’s accountant to sign a Qualified Accountants Certificate (Investor Certificate) verifying the investor has at least $2.5 million of net assets, or has earned $250,000 per annum in the past two years.

Sophisticated Access recently launched Cygura, a secure, real-time registry for investors and their accountants, financial advisors and product issuers to manage Sophisticated Investor Certificates online.

Tilse says more product providers are recognising the importance of sophisticated investor compliance and are incorporating better practices and processes into their compliance regime by using Cygura.

“Cygura is simple to use, more secure, transparent, and real-time. Given a lot of financial products are moving to online delivery, Cygura helps these organisations manage their process with better controls.”