April 15, 2025
ASIC’s Report on Private Markets: Key Takeaways for Financial Services
Explore key takeaways from ASIC’s private markets report, including risks, investor classification concerns and compliance opportunities.
The Parliamentary Joint Committee on Corporations and Financial Services (Committee) has ruled out increasing financial thresholds used to determine who qualifies as a wholesale client under the Corporations Act 2001 (Cth) (Act). The Committee released a report in February 2025 into its inquiry into the wholesale client tests under sections 761G and 761GA of Chapter 7 of the Act.
Paula McCabe, founder and legal director of PMC Legal, appeared in person before the Committee on behalf of the Alternative Investment Management Association (AIMA) to assist the Committee with their review of the tests. Despite ASIC’s push for higher thresholds, the Committee found no compelling reason to change them.
The Committee received many submissions, including from ASIC, which argued that qualification thresholds were outdated due to inflation, thereby increasing the pool of eligible wholesale investors. The current income and assets thresholds for wholesale clients are $250,000 in annual gross income or $2.5 million in net assets measured over the previous two years.
A substantially larger number of Australians now qualify as wholesale clients under the tests compared to when the eligibility standards were first introduced. Theoretically, this could increase exposure for investors who lack the financial muscle to absorb risk.
The Committee rejected this notion, citing no evidence of increased investor risk or harm. The implications of raising thresholds could have included limiting investment opportunities and disrupting funds.
While the Committee rejected an increase to current thresholds, it supported implementing periodic reviews and a complete overhaul of the sophisticated investor test. Criticised for being “too subjective,” it recommended the Government amend the Act to incorporate more objective qualification criteria regarding the investor’s knowledge and experience.
Any amendment would be subject to stakeholder consultation to ensure thresholds remain relevant without major regulatory shifts. If reformed, this could reshape how financial services businesses classify investors.
No immediate changes are to follow, which is a win-win for the financial services sector's stability. However, ongoing Treasury reviews could signal potential changes to investor classification criteria on the medium-term horizon.
The Committee recommended that the Government consider the following:
PMC Legal and AIMA remain engaged in supporting balanced, evidence-based policy decisions. For now, wholesale investors and financial services providers should stay updated and prepare for potential refinements to the wholesale client tests.
PMC Legal is monitoring these changes and will keep you up to date.
