The corporate regulator did not adequately review the impact of its recommended increase to the wholesale investor threshold, conceding on Friday that it had relied on its own judgement to make a call that has angered the tech sector.
In response to potential changes to wholesale investor and client tests, the Australian Securities and Investment Commission (ASIC) has recommended raising the current threshold set in 2002 to account for inflation.
The move would nearly double the income and asset tests used to qualify and is expected to knock a substantial number of investors back to retail status.
They would be unable to access riskier and complex opportunities open to wholesale investors like angel investment and venture capital.
ASIC insists a substantial amount of wholesale investors would still qualify and other fund-raising avenues exist.
Its submission to a joint committee examining changes claims the regulator claimed the change would not “have a material impact on the fund-raising community”.
But groups representing angel investors, the wider tech sector and capital intensive sectors like medical technology have decried the tightening as a catastrophic for early stage ventures.
ASIC commissioner Kate O’Rourke conceded on Friday that no specific review or external exercise had been conducted to “measure the exact impact to draw that conclusion” about a lack of material impact.
“If you’re question is did we do a survey or research, I think the answer is that we did not,” Ms O’Rourke told the committee.
“That is a judgement that we have made: That the increases that we have described would still allow for a significant group of people and entities to be considered wholesale [investors] in our community and for there to be other mechanisms [for fund raising].”
Committee chair Deborah O’Neil fired back that it seemed as though ASIC had made a “baseless” claim about a change that could fundamentally impact the economy.
Ms O’Rourke said she accepted it has become a continuous issue but said ASIC is engaging in good faith in a public consultation.
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