Key Documents
Under the Corporations Act 2001, operators of financial markets must have an eligible compensation scheme to protect investors.
The National Guarantee Fund (NGF) is a compensation scheme that applies to members of the Securities Exchanges Guarantee Corporation. The NGF provides compensation for retail and wholesale clients who incur a loss in their dealings with participants in four circumstances, as set out in the Corporations Regulation 2001.
Currently only claims relating to an insolvent participant are capped, with the three other circumstances uncapped. This means that the NGF could be depleted by one or more large claims.
To ensure the sustainability of the NGF, this draft Regulation proposes to make three changes to the exisitng regime:
- introduce a cap of $1 million for claims made by the same claimant that relate to the same participant and the same event;
- introduce a sub-cap of $250,000 in relation to cash held with a participant; and
- amend the existing per participant cap which applies to the insolvent participant head of claim (15 per cent of the prescribed minimum size of the NGF) to cover all heads of claim in the event of an insolvency.