ASIC’s client money reporting rules finalised

ASIC has released the finalised ASIC Client Money Reporting Rules 2017 (client money rules) which, from 4 April 2018, will impose record-keeping, reconciliation and reporting obligations on Australian financial services (AFS) licensees that hold ‘derivative retail client money’ within the meaning of the Corporations Act, unless the client money relates to a derivative that is traded on a fully licensed domestic market, such as ASX 24.

ASIC Commissioner Cathie Armour said, ‘The client money rules will ensure greater transparency in relation to an AFS licensee’s receipt and use of derivative retail client money. They will apply more formal and consistent standards across the derivatives sector and will ensure any discrepancies in an AFS licensee’s client money account are notified to ASIC in a timely manner and enable ASIC to take appropriate action.’

The final client money rules incorporate some changes in response to industry consultation and feedback on Consultation Paper 291 Reporting rules: Derivative retail client money (CP 291), issued in July 2017 (refer: 17-231MR).

‘ASIC has carefully considered stakeholder feedback arising from CP 291 and has made some changes to address the issues raised.  In particular, the changes to the timing of the reconciliation requirements will provide licensees with greater flexibility and make the client money rules easier to comply with’,  Ms Armour said.

ASIC’s response to the submissions it received during the consultation is detailed in Report 546 Response to submissions on CP 291 Reporting rules: Derivative retail client money (REP 546).

ASIC has also today released Information Sheet 226 Complying with the ASIC Client Money Reporting Rules 2017 (INFO 226) to assist AFS licensees comply with their obligations under the client money rules.

The release of the client money rules follows the passage of Treasury Laws Amendment (2016 Measures No. 1) Bill 2016 and the Corporations Amendment (Client Money) Regulations 2017. These reforms will prevent AFS licensees from withdrawing client money provided by retail derivative clients, and using it for the wide range of purposes currently permitted under the Corporations Act, including as the AFS licensee’s own working capital.

The client money rules will commence on 4 April 2018, at the same time the other client money reforms take effect.  This gives AFS licensees a six month transition period to ensure they have the necessary systems, policies and procedures for complying with the client money rules.

The release of the client money rules and guidance follows public consultation in July 2017 (see 17-231MR).


© Australian Securities & Investments Commission. Reproduced with permission.