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.
There is a possibility that further amendments will be made to RG 126 to reflect changing market conditions, so watch this space.
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