Improving the regulation of managed investment schemes is essential to protect consumers as the losses from inappropriate investments can be devastating. In particular, our submission recommends that consumers are appropriately classified as retail or wholesale clients and that ASIC has appropriate powers to refuse to register a scheme where there is a risk of significant consumer detriment. It is also important that consumers have rights to withdraw from schemes that reflect their expectations.
Strengthening the regulation of managed investment schemes is only one step towards appropriately protecting consumers in this market. CHOICE continues to advocate for the government to include managed investment schemes in the compensation scheme of last resort. People bankrupted by failed investments must be able to receive full financial compensation when dispute resolution rulings are found in their favour, regardless of whether the responsible financial firm continues to operate.
Our submission looks to the Sterling First collapse as a case study for why these reforms are needed urgently and makes a number of recommendations under these themes:
- Make changes to wholesale client financial thresholds and limit the number of people that qualify
- Consent requirements should be consistent and should be complemented by a requirement to obtain independent advice
- ASIC should be able to refuse to register a scheme if there is a significant risk of consumer harm
- The definition of liquid schemes should match consumer expectations
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