CFDs – Wholesale Clients

The Corporations Act 2001 (Cth) (“Corporations Act”) and the Corporations Regulations 2001 (“Corporations Regulations”) include a range of different options for how to classify a client as wholesale. Only one of the tests is required to be met per client. 

CFD issuers may use the following tests when classifying a client as a wholesale client: 

• Net assets and gross income test – the person has net assets of at least $2.5 million or gross income for the last two financial years of at least $250,000, as certified by an accountant. Note: the accountant’s certificate lasts for two years before it is required to be renewed.
• Sophisticated Investor test – this category are persons who the licensee has determined to be experienced in using financial services. In order to qualify for the test, the following conditions must be met:
  • The product is not a general insurance product, superannuation product or an RSA product;
  • The product or financial service is not used in connection with a business;
  • The licensee is satisfied on reasonable grounds that the client has previous experience in using financial services and investing in financial services and investing in financial products that permits the client to assess a range of specified factors;
  • The licensee gives to the client a written statement of its reasons for being so satisfied; and
  • The client signs a written acknowledgement in relation to certain matter.

Note: anyone qualified under this test must be treated as a retail client for the purpose of the ASIC Client Money Reporting Rules 2017. For more information, please refer to this page.

• Professional Investor test – includes: AFS Licence holders; bodies regulated by APRA; a trustee of a super product with more than $10 million in gross assets; a listed entity and its related body corporates; an exempt public authority and a person who carries on an investment business that is offered to the public; and
• Large business test – the client is a business which has more than 20 employees (or 100 employees in the case of a manufacturing business).