ASIC has this week released updated guidance for Australian financial services (AFS) licensees that hold client money for trading in over-the-counter (OTC) derivatives.
By Sara Le Breton, Compliance Quarter.
ASIC Client Money Guidance Update
The release of the updated guidance coincides with the start of ASIC’s Client Money Reporting Rules 2017 (client money reporting rules) and other client money reforms on 4 April 2018 enacted under the Treasury Laws Amendment (2016 Measures No. 1) Act 2017 and the Corporations Amendment (Client Money) Regulations 2017.
The updates can be found in ASIC Regulatory Guide 212 ‘Client money relating to dealing in OTC derivatives ‘ (RG 212) and INFO Sheet 226 ‘Complying with the ASIC Client Money Reporting Rules 2017’ which have both been updated to reflect the changes to the law.
The reforms mean that the circumstances in which an AFS licensee may use ‘derivative retail client money’, within the meaning of the Corporations Act, have been significantly restricted. In particular, AFS licensees can no longer withdraw derivative retail client money from the client money account and use it for a wide range of purposes, including as the licensee’s own working capital.
The changes also impose new record-keeping, reconciliation and reporting requirements on AFS licensees that hold derivative retail client money (unless the client money relates to a derivative that is traded on a fully licensed domestic market, such as ASX 24).
ASIC has flagged that the transition period has now ended and that it expects all AFS licensees know and comply with the new client money obligations from 4 April 2018. Please get in touch if you would like further guidance in relation to the reforms and how your business needs to alter its processes to ensure ongoing compliance — be regulator ready.
Should you wish to discuss this in more detail, please contact the team at Compliance Quarter by clicking here.