Friday 23 June 2006 The Australian Securities and Investments Commission (ASIC) today announced a new class order [CO 06/495] extending the transitional compensation arrangements under s912B of the Corporations Act 2001 until 31 December 2006. ‘ASIC is continuing the transitional arrangements for six months to maintain current minimum compensation requirements while the Government considers its position on a final compensation regime’, said ASIC’s Executive Director of Regulation, Mr Malcolm Rodgers.
Background Section 912B of the Corporations Act requires an Australian financial services licensee who provides financial services to retail clients to have in place arrangements to compensate those persons for loss or damage suffered because of breaches of obligations under Chapter 7 of the Corporations Act.
Section 912B was introduced by the Financial Services Reform Act 2001 but did not take immediate effect. The Government delayed the operation of s912B until 30 June 2006 so that it could consult on the details of the compensation regime under s912B. We understand that as a result of these consultations the Government is considering what measures are needed to assist with implementation of s912B.
Under Class Order [CO 06/495] the expiry date of the transitional arrangements (and reg 7.6.02AA) has been extended to 31 December 2006. Current transitional arrangements Under a combination of regulations and licence conditions, some licensees are currently subject to transitional compensation arrangements while the operation of s912B is delayed. The transitional arrangements are:
• professional indemnity insurance requirements continue to apply to most responsible entities of managed investment schemes
• dealers and advisers in investment products remain subject to security deposit requirements
• insurance brokers remain subject to the professional indemnity insurance requirements that applied under the superseded Insurance (Agents and Brokers) Act 1984, and
• market operators continue to maintain fidelity fund style compensation arrangements (and ASX continues to operate the National Guarantee Fund).
Copies of class order [CO 06/495] can be obtained from the ASIC Infoline by calling 1300 300 630 or from the ASIC website at www.asic.gov.au/co.
Note: The class order will commence after it has been recorded on the Federal Register of Legislative Instruments (FRLI) in electronic form. The FRLI may be accessed at www.frli.gov.au. For further information contact: Mark Adams Director, Regulatory Policy Telephone: 02 9911 2622 Mobile: 0402 428 025 Kate Harvey ASIC Media Unit Telephone: 03 9280 3553 Mobile: 0401 985 966