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New private investor rights and obligations at risk

By Mike Worsnop - 10 May 2011

The Financial Markets Authority (FMA) this week has warned private investors against allowing themselves to be classified as wholesale investors and so losing new retail rights and protections. A part of the Financial Advisers Act 2008 (Act) which comes into force from 1 July 2011 means that financial advisers have to follow new professional conduct standards and disclosure requirements.

However those standards and requirements do not extend to "wholesale clients".  The FMA warning is against steps taken by some financial advisers to have clients, who would otherwise be classed as retail investors, signing documents to classify themselves as "eligible investors" - this would result in the client being treated as a wholesale investor under the Act and so not entitled to the new protections.

A wholesale investor includes investors with net assets or turnover of over one million dollars (as well as local authorities and crown entities).  If you fall into this category and/or have been asked to confirm that you are an "eligible investor" the Act allows you to revoke or opt out of giving that certification.  This power rests with the investor and so the investor has the ability to choose to be treated as either a retail (with protections) or wholesale (without protections) investor.


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