FPA lambasts ASIC over wrap

The FPA has objected to the high financial criteria proposed by ASIC for licence holders of wrap accounts.

The FPA has objected to the high financial criteria proposed by ASIC for licence holders of wrap accounts.

In its submission to the ASIC, the FPA argues that these requirements will stop smaller dealer groups from developing their own wrap ac-counts. ASIC is proposing a net tangible asset requirement of the be-tween $50,000 and $5 million, depending on value of assets under man-agement.

In its submission, the FPA argues that the financial requirements of the wrap operator are already covered under the managed investment regulations. The costs of meeting these extra financial criteria would inevitably be passed onto investors as increased costs, the as-sociation says.

"The requirement for an operator to meet minimum financial criteria may preclude smaller dealers from directly offering a wrap service under their own badge," the submission adds.

The FPA has also raised objections about proposed quarterly state-ments on investors' assets.

"The FPA questions whether this frequency of reports is too much un-less, of course, demanded by the client," the submission says. "We believe that the frequency be determined at the discretion of the client."

The association also argues that, as wrap services will make consid-erable use of the Internet, investors will be able to check on their portfolios whenever they wish.

The FPA believes the name wrap accounts does not adequately describe the service being offered.

It proposes wrap accounts should be called Investor Directed Portfo-lio Services (IDPS). ASIC has proposed calling wraps Non-Discretionary Portfolio Services.