If you earn less than $250,000 per annum and have less than $2.5m in assets, the government considers you to be an ‘unsophisticated investor’ for the purposes of section 708 of the Corporations Act.
As a result, they are bent on protecting you from yourself.
With a couple of exceptions, you are prohibited from taking part in a discounted capital raise unless the company raising the capital goes to the considerable expense and effort of producing a prospectus, jam-packed with ‘buyer beware’ statements that nobody reads.
I’d like to know what a so-called ‘unsophisticated investor’ doesn’t understand about buying Wesfarmers shares at $40 each, when the market price is $43.
I don’t see the government saving anybody from the gold toothed bookie at Ascot Racecourse or the glittering lights of Crown Perth, so why should heavily discounted capital raises only be offered to so-called ‘sophisticated investors’?
The outcome of all this is that the rich get richer and the not-so-rich remain that way.
The good news, however, is that the new reforming Federal Finance Minister Mathias Corman is a West Australian and could fix this easily without opposition.
What do you think? Email Matt Birney at email@example.com.
Matt Birney is the Managing Director of Investor & Government Relations firm Birney Corporate.