PI cover turns into compliance hurdle
Inadequate professional indemnity (PI) insurance is proving a major compliance hurdle for financial planning dealer groups, the Australian Securities and Investments Commission (ASIC) has warned.
The corporate watchdog’s annual report, released last week, revealed ASIC had conducted 284 checks on Australian Financial Services licensees to verify compliance with new regulations after the Financial Services Reform Act came into effect in March.
The checks resulted in ASIC forcing a change to the procedures of licensees on 128 separate occasions and making 24 referrals for further action.
According to the report, inadequate professional indemnity insurance was one of the major problems.
Other problems identified included poor risk management and insufficient dispute resolution procedures.
“The cost of PI has generally gone up from what we understand,” said ASIC executive director financial services regulation Ian Johnston.
“But we’re aware Treasury has been looking at what the compensation arrangements are that should be in place for a licensee. At the moment those compensations are PI cover but that’s something that’s under review.”
The news comes a week after the Financial Planning Association (FPA) revealed its attempts to establish a professional indemnity insurance scheme for its members was on a knife edge.
As reported by Money Management last week, FPA chief executive Kerrie Kelly said negotiations with an unnamed insurer were close to being finalised, but warned they could be scuttled because dealer groups were reluctant to hand over information about their insurance claims history.
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