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ARTICLE · 13 NOVEMBER 2009

No Need For Automatic Run-Off Cover For AFS Licensees From 1 January 2010

Clayton Utz
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The Australian Securities and Investments Commission has relieved holders of an Australian Financial Services Licence from the need to hold 12 months of automatic run-off cover as part of their professional indemnity insurance policies.

AustraliaInsurance
Peter Mann
Peter Mann
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The Australian Securities and Investments Commission has relieved holders of an Australian Financial Services Licence from the need to hold 12 months of automatic run-off cover as part of their professional indemnity insurance policies. The change will come into effect on 1 January 2010.

The change, which is found in an updated version of "Compensation and insurance arrangements for AFS licensees" (RG 126), is a recognition of the fact that AFS licensees simply cannot get automatic run-off cover in the current market.

This means that

  • until 31 December 2009 – PI insurance will be adequate as long as it meets the remaining requirements of RG 126; and
  • from 1 January 2010 – in addition to the above, AFS licensees must obtain switching cover that covers the situation where an AFS licensee moves a client from a product that is not on the approved product list to one that is on the approved product list.

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