ASIC has released a consultation paper (pdf) inviting
comment on its proposals for administering the new compensation and
professional indemnity insurance requirements. These requirements apply
to Australian financial services licensees who provide financial
services to retail clients.
Licensees with an AFS licence that commenced before 1 January 2008 must have insurance in place by 1 July 2008. Those with a new AFS licence commencing on or after 1 January 2008 need to meet the compensation requirements from the date their licence commences.
The new requirements were introduced by regulation
7.6.02AAA of the Corporations Regulations 2001 on 28 June 2007 and
s912B of the Corporations Act 2001.
They make professional indemnity insurance the main way licensees are
to meet their compensation arrangement obligations. Licensees are
responsible for assessing their business and ensuring they have
adequate insurance cover.
The consultation paper seeks feedback on:
- ASIC’s proposed policy on what is adequate professional indemnity insurance cover;
- some challenges to the regime and some practical options responding to these challenges;
- ASIC’s proposed guidance on how licensees should approach the new requirements; and
- ASIC’s policy for approving alternative arrangements to professional indemnity insurance.
ASIC invites comments on the proposals set out in the consultation paper by 14 September 2007. ASIC plans to issue a regulatory guide on the issue by November 2007.