The Sophisticated Investor rule needs to change

For the past 20 years, the Corporations Act has allowed investors who obtain a certificate from an accountant to be classified as a 'sophisticated investor'. If you meet the test, then the issuer of the financial product does not need to provide the more stringent product disclosure statement that would ordinarily be required. To qualify, you either need to have net assets of $2.5 million or have a gross income of at least $250,000 per annum for the last two years.

The rule has been in place for almost 20 years and has never been updated. ASIC seriously needs to look at replacing the test.

We have seen numerous examples where investors have met the test but are clearly not 'sophisticated' in the sense of what was envisaged when the rule was first introduced.