Coronavirus (COVID-19) updates from the Australian Government

Principal Issues

It would be appreciated if, in responding to these questions, you particularly address the costs and benefits of your suggestions to consumers, business, government and the community.

1 Can you provide any evidence of the nature and extent of losses suffered by consumers of financial services to assist us to understand the extent of the problem? (page 18)

2 Is requiring compensation arrangements in the financial services sector justified? (page 27)

3 What is the purpose of compensation arrangements which are required by legislation? (page 31)

4 (a) In what circumstances should compensation arrangements be required in relation to a financial services licensee? (page 40)

      (b) Should different criteria or a different mechanism apply depending on whether the financial service provider is solvent or unable to pay/insolvent? (page 40)

      (c) Should compensation arrangements relate only to the situation where the financial services licensee is unable to pay/insolvent? (page 40)

5 Who should be entitled to claim? (page 42)

Financial services licensees

6 What compensation requirements should be imposed on financial services licensees? (page 48)

      (a) Should financial services licensees be required to have professional indemnity insurance? Are there other appropriate mechanisms which could be alternatives at the option of the licensee? (page 48)

      (b) What should the mechanism adopted be required to cover? (page 51)

7 (a) What, if any, difficulties are being experienced in the financial services sector with the cost and availability of professional indemnity insurance? For example, is run-off cover available? (page 49)

      (b) What, if any, difficulties have consumers had in being compensated from professional indemnity insurance policies? (page 49)

Market licensees

8 Should market licensees continue to be required to make compensation arrangements (as they have in the past and are in Part 7.5)? (page 58)

      (a) If so, what changes to the current Part 7.5 should be made? (page 58)

      (b) Is there justification for a consolidated scheme for financial services licensees who are market participants? (page 59)

9 Should prescribed CS (clearing and settlement) facility licensees be required to have compensation arrangements in relation to unauthorised transfers/certificate cancellation or some wider conduct? (page 60)

A broad statutory scheme?

10 Do the financial services industry and consumers consider that a broad statutory scheme is warranted? (page 62)

11 If so:

      (a) should it be available prior to insolvency or only on inability to pay/insolvency? (page 63)

      (b) on what grounds should claims be paid? (page 63)