Hamilton Locke Prepares Submission on Wholesale Investor/Client Tests

Hamilton Locke has prepared a submission to the Parliamentary Joint Committee on Corporations and Financial Services’ (the Committee) inquiry into the wholesale investor and wholesale client tests contained in section 708 of Chapter 6D and sections 761G and 761GA of the Corporations Act 2001(Cth).

Our key recommendations

The inquiry seeks feedback on the wholesale investor/client tests. We made several recommendations in our submission to the Committee, including:

(a) Adjusting thresholds for the net assets, gross income (individual wealth tests) and product value tests.  

    • The net assets test of $2.5 million or gross income of $250,000 per year (over the last two years) and the product value tests of $500,000 or more for a financial product, have not changed since they were first introduced in 2001. These amounts should be increased to reflect the passage of time and hereafter should be automatically indexed annually in line with an appropriate index.

(b) Discounting of the principal place of residence from net assets for the purpose of the individual wealth test.

    • To protect vulnerable consumers, a threshold should be imposed so that only the value of a principal place of residence that exceeds that threshold can be counted for the net assets test.

(d) The inclusion of alternatives to the small business test.

    • We recommended that a multifactorial approach be included for the small business test so that a business is not assessed as wholesale based solely on the number of employees. For example, a business might be assessed as wholesale if it exceeds thresholds relating to the number of employees or consolidated revenue or gross assets.

(e) Addressing the practical challenges of tying the design and distribution obligations and the product intervention powers to the retail client definition for credit products.

    • The design and distribution obligations and the product intervention powers apply to credit products provided to ‘retail clients’, however, there is no definition of ‘retail client’ for credit products and many of the existing tests cannot apply. We explored how each of the tests are insufficient and recommended that a new test be included to specifically capture credit facilities.

(f) Clarification on self-managed superannuation funds and strata insurance.

    • We recommended that clarification is required on how the individual wealth tests apply to SMSFs given that no one SMSF member can ever ‘control’ an SMSF under superannuation law.
    • We recommended clarification on how the wholesale investor/client tests apply to strata corporations given that a strata corporation is neither an individual nor a business and therefore it is unclear how the general insurance retail client test applies.

You can read our submission here.


Hamilton Locke’s Funds and Financial Services team are technical specialists who have a broad and deep understanding of payments regulation, together with other financial services regulations, which we use to provide practical solutions for a range of sectors, including credit, payments, funds, wealth management, crypto and general insurance.

We are technical and industry-focused specialists that have a broad and deep understanding of the Australian regulatory environment and the impacts that it has on our client’s products and service offerings. Our financial services expertise is market-leading, and we use our industry knowledge and expertise to deliver practical, compliant, and innovative solutions for our clients.

For more information, please contact Jaime Lumsden, Michele Levine or Charmian Holmes.


Partner, Head of Funds and Financial Services