AFCA’s discretion over whether it will pursue a complaint for a wholesale investor comes down to whether the label has been applied properly.
Speaking at the Stockbrokers and Investment Advisers Conference earlier this week, AFCA advice lead ombudsman Shail Singh responded to queries regarding the authority’s use of discretion when assessing cases brought by wholesale clients.
Singh said the authority has discretion to exclude complaints from wholesale investors, but it’s not mandatory.
“Sometimes there’s a bit of misinformation on this issue, it’s good to be able to clarify,” Singh said, adding AFCA will hear ‘wholesale’ complaints because a retail investor has been misclassified to circumvent appropriate consumer protections.
“We’re not saying that’s the case for every sort of wholesale investor, but there’s certainly instances where it’s happened in the past.”
In the current system, AFCA has the discretion to exclude wholesale complaints although SIAA has been among the associations that have questioned the authority’s oversight.
Singh pointed to Chapter 7 of the Corporations Act which says high net worth, sophisticated or professional investors are exempt from retail protections like best interests duty or seeing a FASEA qualified advisers.
“What Treasury said was for Chapter 7 purposes – for sophisticated and professional investors – they should be outside jurisdiction unless there is an issue with the classification,” Singh said.
“We’re amending our operational guidelines essentially to reflect Treasury’s recommendations and that’s what Treasury’s recommendation was.”
Singh said the bottom line is if someone is properly classified as wholesale and are properly informed of the consequences it is highly unlikely they would pursue those complaints.