(1) This regulation makes arrangements about the value of an investment-based financial product to which a financial service relates.
Note: Under paragraph 761G(7)(a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless the price for the provision of the financial product, or the value of the financial product to which the financial service relates, equals or exceeds the amount specified in regulations made for the purposes of that paragraph as being applicable in the circumstances.
Under paragraph 761G(10)(a) of the Act, the regulations may also deal with how a price or value referred to in that paragraph is to be calculated, either generally or in relation to a specified class of financial products.
In general, the 'value' of a product will be the amount that the product is worth once it is issued or acquired by the client. It is anticipated that the test for the value of the product in paragraph 761G(7)(a) of the Act will usually be used to assess a client's status as a retail or wholesale client at or before the time that a financial service (eg financial product advice, disposal of the product) is provided to the client in respect of an existing product.
(2) For paragraph 761G(7)(a) of the Act, the amount applicable in relation to an investment-based financial product is $500 000.
Working out value: general rule
(3) For paragraph 761G(10)(a) of the Act, the value of an investment-based financial product on a day is:
(a) if the financial product is a security, or a financial product under paragraph 764A(1)(j) of the Act--the market value of the investment-based financial product; or
(b) if paragraph (a) does not apply--the amount of money that stands to the client's credit in relation to that investment-based financial product.
(4) For subregulation (3), in calculating the value of an investment-based financial product:
(a) disregard any amount standing to the client's credit in relation to the investment-based financial product to the extent that it is to be paid, or was paid, out of money lent by:
(i) the person offering the investment-based financial product; or
(ii) an associate of that person; and
(b) disregard any amount of fees or charges:
(i) that the product issuer has an actual or accrued right to deduct, or otherwise to have access to, from the value of the investment-based financial product (whether or not the amount has been deducted); or
(ii) that has accrued as at the time that the client's status as a retail or wholesale client is assessed.
Cumulative value of products
(5) If, at a single point in time:
(a) a financial service that is being provided to a client is:
(i) financial product advice; or
(ii) arranging for a person to engage in conduct in accordance with subsection 766C(2) of the Act; and
(b) the financial service is provided in respect of:
(i) more than 1 investment-based financial product; or
(ii) more than 1 income financial stream financial product; or
(iii) a combination of investment-based financial products and income financial stream financial products; and
(i) the total price for the provision of those financial products is at least $500 000; or
(ii) the price or value of all of those financial products is at least $500 000;
the value of the financial products is taken, for subregulation (3), to be greater than the amount mentioned in subregulation (2).
(6) Subregulation (5) does not affect the operation of Part 7.9 of the Act, and Part 7.9 of these Regulations, to the extent that they require the provision of a Product Disclosure Statement in relation to the financial product advice.
Note: Although the effect of subregulation (5) is that the value of the investment-based financial products is taken to be at least $500 000 in the circumstances mentioned in that subregulation, a client must still be provided with appropriate product disclosure and other requirements in accordance with Part 7.9 of the Act as a retail client in relation to a particular investment-based financial product where the price of the product is less than $500 000.
In any situation in which a Product Disclosure Statement would be required for a retail client (the situations described in Subdivision B of Division 2 of Part 7.9 of the Act), the limit of $500 000 must be reached for any single investment-based financial product, or income stream financial product, before the client will be treated as a wholesale client.
(7) If the investment-based financial product is a group product covered by subsection 1012H(1) of the Act:
(a) the amount in subregulation (2) is to be used to determine the status of each person who elects, or may elect, to be covered by the investment-based financial product; and
(b) subregulation (3) is to be used to determine the value of the investment-based financial product to the extent that it stands, or will stand, to the credit of, each person who elects, or may elect, to be covered by the investment-based financial product.
Time of assessment
(8) If a financial services provider needs to assess the status of a client as either retail or wholesale at a particular time in order to ensure that the client complies with the Act, or for any related purpose, the value of a financial product may be assessed at any time, whether or not a financial service is being provided at that time in relation to that product.
Note: Subregulation (8) will ensure that a provider of financial services may assess a client's status at any time (for example, the provider may need to ascertain whether a periodic statement must be sent to the client under section 1017D of the Act because the client is a retail client).