http://www.smh.com.au/business/you-too-can-be-a-sophisticated-investor--but-theres-a-catch-20110513-1emii.html#ixzz1MNM9tApY
"WE HAVE looked at growth investors, income investors and value investors, at traders, plodders and day traders, at the one-stock portfolio, the boat fund and the 80:20 approach. Now let's move on to the sophisticated investor.
A sophisticated investor is someone deemed by the Corporations Law to be able to evaluate offers of securities (shares) and financial products without needing the usual protection of a regulated disclosure document. In other words, brokers can sell you stuff more quickly and with less disclosure under the core principles of caveat emptor, buyer beware.
To qualify for your sophisticated investor status you have to get a certificate from a qualified accountant certifying that you had a gross income of $250,000 or more in each of the previous two years or have net assets of at least $2.5 million. The certificate is valid for two years.
All very well, but you have to ask why would you want to qualify for a lack of protection from the Corporations Law and why would you want to buy anything without a product disclosure statement?
The answer, of course, is that the lower level of care owed to sophisticated investors enables brokers to offer a select group of investors exclusive sharemarket deals that they are not allowed to offer to the unsophisticated investor, a process that often enrages the excluded masses.
But let's clear this up, this inequity for the enraged, unqualified majority. The sophisticated investor structure is there to protect unsophisticated investors, not exclude them. The sharemarket exists to raise capital. It is simply a conduit for capital to pass between investors and investments. When more risky ventures find the banks unwilling, the sharemarket steps in; that's what it's there for.
In the higher-risk world of small-company capital raisings the sophisticated investor legislation provides essential bureaucratic short cuts that allow companies to raise capital in short periods at a bearable cost. If every deal had to be done through a product disclosure statement over months, the largest listed companies would be corporate law firms, investment banks and printing companies.
For most of you, requests for capital manifest themselves as the Myer IPO, or a Leighton share purchase plan, but this is just the boring plain vanilla tip of the sharemarket iceberg. While you are reading product disclosure statements there is a frenzy of sophisticated and wholesale (institutional) investor activity going on. In the past 30 days, for instance, there have been 180 share placements put away, the bulk of which had no prospectus and went to the sophisticated and wholesale clients of whichever broker handled the deal. As another example, the broker I work with, Patersons Securities, has raised in excess of $6.6 billion in 760 issues since 2000, a lot of which did not require a PDS and many of which were placed with the sophisticated client bases of its full-service advisers. It's a key part of what a full-service broker offers over the rest.
By becoming a sophisticated investor and putting your name down on the sophisticated investor register of your friendly neighbourhood broker, you make yourself available for these offers, which include not just small-company placements but some of the very big share issues as well. Most notably, the recent spate of accelerated placements since the global financial crisis and most hybrid issues coming from mainstream top-100 companies did not have product disclosure statements and were available only within this structure.
Of course, it's not all roses. When the only qualifying criterion is that you are rich, your sophisticated investor moniker can make you more of a target than a champion, and to qualify for the best placements you are going to need a good (regular) rather than simply sophisticated (cherry-picking) relationship with your broker. Without that you aren't going to be at the top of the list.
Being a sophisticated investor is a free option on getting offered financial opportunities. So what's the catch? It's pretty obvious, really. You may qualify as a sophisticated investor but are you qualified to be a sophisticated investor? Caveat emptor. That's the catch..."
- Forums
- ASX - By Stock
- for those who complain about si placements
http://www.smh.com.au/business/you-too-can-be-a-sophisticated-inv...
-
- There are more pages in this discussion • 10 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add VIL (ASX) to my watchlist
Currently unlisted public company.
The Watchlist
CCO
THE CALMER CO INTERNATIONAL LIMITED
Anthony Noble, MD & CEO
Anthony Noble
MD & CEO
Previous Video
Next Video
SPONSORED BY The Market Online