Obtaining PI not a big problem claims ASIC
Obtaining professional indemnity (PI) insurance is difficult for financial planning firms but the Australian Securities and Investments Commission (ASIC) has provided data to a Parliamentary Committee suggesting that it is not a significant or insurmountable hurdle for licensees.
The regulator has claimed that last financial year only two out of almost 600 Australian financial services (AFS) licence applicants withdrew citing an inability to obtain PI insurance and that those two applicants were, in any case, not advice licence applicants.
Furthermore, it said that in the first quarter of the current financial year no applicants have withdrawn citing an inability to obtain PI cover and that a “small number who claimed they were unable to obtain cover were subsequently able to”.
“In the 15 months to 30 September, 2020, 31 of 2,000 (2%) breach reports from AFS licensees related to difficulties in obtaining PI insurance,” it said.
“ASIC does not have the ability to influence the price or availability of PI insurance,” the regulator said. “We can attempt to assist licensees facing difficulties with obtaining PI insurance by considering submissions from licensees for alternative compensation arrangements as contemplated under the regulations.”
“ASIC has not received an application seeking approval of alternative compensation arrangements from an advice licensee or licence applicant. ASIC received one application from an advice licensee seeking a no-action position while they attempted to obtain PI insurance,” it said. “The applicant subsequently confirmed with ASIC that they intended to operate as a corporate authorised representative under another licensee and lodged an application with ASIC to suspend their AFS licence.”
Queensland Liberal back-bencher, Bert Van Mannen had asked ASIC whether it was concerned about the state of the PI market and what it intended to so if the situation deteriorated.
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
