Who counts as a wholesale investor in Australia? The s708 and s761G tests explained
“Are they wholesale?” is one of the most common questions in Australian funds management, and one of the most often answered incorrectly. Whether an investor qualifies as wholesale determines whether you can offer them an unregistered fund, whether you need a Product Disclosure Statement, and the protections they are entitled to. Getting it wrong can void offers, breach licence conditions and create real legal exposure.
The rules sit across two sections of the Corporations Act 2001: section 708 (which governs disclosure for securities offers) and section 761G (which defines wholesale clients for financial services more broadly). Most wholesale fund offers need to comply with both.
Note: This article is a general guide, not legal advice. Always confirm an investor’s status with appropriate legal and compliance support before accepting a subscription.
Why the distinction matters
If you treat a retail investor as wholesale, the consequences can include voiding the offer and a right of refund, breach of your licensee’s authorisations, personal liability for directors, ASIC enforcement action, and reputational damage.
The main wholesale tests
1. The product value test ($500,000 minimum investment)
If an investor invests at least $500,000 in a single product, they are treated as wholesale for that offer. The $500,000 must be invested in a single product and cannot be aggregated with investments by associates.
2. The sophisticated investor test ($2.5 million net assets or $250,000 gross income)
An investor qualifies if a qualified accountant certifies in writing that the investor has net assets of at least $2.5 million, or gross income of at least $250,000 for each of the last two financial years. The certificate must be current (within two years) and the accountant must be a member of a recognised professional body.
3. The professional investor test
Some investors are deemed wholesale because of who they are, regardless of investment size. These include AFS Licensees, listed entities, regulated superannuation funds with net assets above $10 million, APRA-regulated bodies, and persons with at least $10 million invested in financial products.
4. The business or government test
Large operating businesses and government entities are treated as wholesale under technical thresholds in the Corporations Act.
Self-managed super funds (SMSFs): a special case
SMSFs require particular care. An SMSF is treated as wholesale only if it has net assets of at least $10 million under the professional investor pathway. A trustee’s personal wealth does not make their SMSF wholesale — the two are separate legal persons, each tested on their own facts. ASIC has signalled increasing focus on the use of wholesale tests for SMSF investors.
Section 708 vs section 761G: why both matter
Section 708 governs disclosure obligations for offers of securities (does the offer need a PDS?). Section 761G defines “wholesale client” for financial services more broadly. The two largely mirror each other but are not identical, and a proper compliance framework looks at each investor against both tests.
Common mistakes
The most common errors: assuming sophistication based on relationship; treating an SMSF as wholesale because the trustee is personally wealthy; relying on out-of-date accountant certificates; structuring investments to hit $500,000 with the intent of bringing in a retail investor; and failing to keep adequate records.
Working with FundPro
FundPro builds wholesale investor verification into the standard onboarding process for each fund, and our compliance framework keeps pace with ASIC’s evolving guidance including on SMSF investor status. Get in touch at info@fundpro.com.au.
This article provides general information only and does not constitute legal, tax or financial advice.