Regulator eases cash account restrictions

Australian Financial Services licencees have been granted relief from some restrictive constraints under Corporations Law relating to the treatment of cash common funds.

The Australian Securities and Investments Commission (ASIC) has issued a class order releasing licnecees from having to pay client funds explicitly into an account through an Australian Authorised Deposit-taking Institution (ADI) or a cash management trust.

At present licencees are at times obliged to direct these funds through an ADI under section 981B of the Corporations Act 2001, however the new class order provides relief to permit client assets to be paid into a cash common fund as long as the fund is also a registered scheme under Chapter 5C of the Act.

Cash common funds operate similarly to cash management trusts regulated by ASIC, but are also subject to additional regulation by State governments.

Under the class order, client monies must be paid into an account through an authorised trustee corporation, and must relate to an interest in a registered scheme operated by that corporation and also be commonly known as a cash common fund.

“ASIC considers it appropriate providing licensees with greater flexibility to deal with clients’ money appropriately through our relief, while retaining the underlying consumer protection objectives of [the Act],” ASIC director FSR legal and technical operations John Price says.