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Gaps in ASIC’s accountant crackdown surface


“Substantial deficiencies” in knowledge may be contributing to ASIC’s crackdown on accountants’ provision of disclosure documents to clients, but there are gaps in ASIC’s announcement last week.

By Miranda Brownlee 9 minute read

Late last week, ASIC said it has found that, in recent fundraisings, some accountants have used trust or company structures that purport to allow investors who are not 'sophisticated investors' to receive offers to purchase shares without a prospectus or other disclosure document.

Under the Corporations Act, accountants are able to provide a certificate of attesting that a person is a 'sophisticated investor' and therefore does not need the protections that apply to a 'retail investor'.

The Fold Legal director Jaime Lumsden Kelly said a poor understanding of the wholesale investor test by financial services professionals may have contributed to ASIC’s investigation activities in this area.

Still, ASIC’s statement raises questions about their intentions with the announcement last week.

For example, ASIC has suggested that accountants are using the certificate to circumvent the need for a prospectus for retail investors.

“[However], the accountant is only asked to supply a certificate stating that a client has certain net assets and income. This is an objective fact — either the client does or does not. It is the licensee that then uses that certificate to assess a client as wholesale,” explained Ms Lumsden Kelly.

It is therefore unclear at this stage, she said, whether ASIC is suggesting that accountants are falsifying certificates, or if the accountant providing the certificate is also the licensee in question.

“[The latter] in our view, is a conflict of interest, because the licensee, who is also the accountant who is giving the certificate, is motivated to assess the client as wholesale.

Ms Lumsden Kelly also noted that ASIC has mentioned in the announcement that accountants have used trust or company structures to avoid the need for a prospectus.

“We note that they used the word ‘purported’ which we assume means these structures are not actually lawful,” she said.

“This makes sense to us, because you are only able to avoid using a prospectus with a company or trust if the company or trust is controlled by someone who meets the net assets/income test. If they did meet that test, then there would be no need to try and use some form of additional structure to avoid the prospectus requirement.”

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Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on:miranda.brownlee@momentummedia.com.au

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