Financial services providers will face tighter rules on professional indemnity (PI) insurance following a report on the collapse of Trio Capital and Richard St John’s inquiry into compensation arrangements for consumers.

The Federal Government has accepted the majority of the two reports’ recommendations, “including legislative changes to strengthen the professional indemnity insurance requirements of providers of financial services”.

Financial Services Minister Bill Shorten says the Government will consult on changing the Corporations Act to give legislative force to the Australian Securities and Investments Commission’s (ASIC) standards of adequacy for PI, such as the scope of cover, policy exclusions and coverage.

It will also consult on requiring licensees to report annually to ASIC on the adequacy of their PI cover, as part of their financial reporting requirements.

The Trio report also recommends ASIC and the Australian Taxation Office improve explanations of risk to investors.