Minister Jones pours cold water on investor test reports

Despite media speculation that the threshold to qualify as a sophisticated investor is set to increase from $2.5 million in net assets to $4.5 million, Stephen Jones denied any decision has been reached.

In a video posted to LinkedIn, the minister said nothing will be decided until Treasury has completed its review.

“The review is ongoing and Treasury is still looking into the things that they haven’t made their recommendations to government on,” Mr Jones said.

“So obviously, government hasn’t made any decisions about this either. When we do, we’ll maintain our commitment to the Australian people and to investors to work collaboratively and consultatively to make sure that we get the best outcomes for as Australian consumers and investors.”

Originally announced as part of the 2022 federal budget, Treasury was tasked with reviewing the MIS regulatory framework in March 2023.

According to a statement from Mr Jones at the time, the review aimed to examine whether the regulatory framework is fit for purpose, identify potential gaps, and consider what enhancements can be made to reduce undue financial risk for investors.

“Put simply, the rules around managed investment schemes haven’t been looked at in over 20 years. And over that period, we’ve seen a number of very high-profile collapses,” Mr Jones said on LinkedIn.

“We saw Trio Capital, we saw Timbercorp, and more recently, the Sterling Income Trust. And those have been hugely painful for investors, they lost millions. Now we know that investments carry varying degrees of risk, we need to get the balance right to make sure that we have incentives, but also appropriate consumer protections in place.

“So, we thought that after 20 years, it was worth having a look at the framework to make sure it’s still fit for purpose in 2024 and into the future.”

The section of the review that prompted Mr Jones’ response is around whether the thresholds that determine whether an investor is a retail or wholesale client remain appropriate.

While the minister conceded that the sophisticated investor thresholds are an “important element” of the terms of reference provided to Treasury, it is just “one element”.

“These thresholds haven’t been looked at in quite some time. We just want to make sure that they are still serving the right purpose,” Mr Jones said.

“And while our focus is on managed investment schemes more broadly, we’re also very mindful as we go through this, that we do this in this one part of the financial services law may impact other parts of the law. So, we’re acutely aware of these broader interactions.

“We have no interest in stifling innovation, or unnecessarily restricting mum and dad investors investing in our future. Our main focus is to just make sure the consumer protections and investor protections are fit for purpose in a modern economy.”

A consultation paper was released for consultation from 4 August 2023 to 29 September 2023, with findings from the review expected to be provided to the government by early 2024.