Holders of financial services licences required to have professional indemnity (PI) insurance are being invited to give feedback on the new regulatory regime.

The Australian Securities and Investments Commission (ASIC) has released a consultation paper on the new PI requirements, which apply to all holders of a financial services licence.

Under changes to the Corporations Act, licence-holders must have PI insurance in order to meet compensation obligations. While exceptions are expected to be made, ASIC is concerned there may be practical hurdles in mandating PI cover across the financial services sector.

ASIC Regulation Executive Director Malcolm Rodgers says the new arrangements are limited in scope.

"ASIC will work with insurers, industry and consumers to achieve the Government's objective of reducing the risk that licensees cannot meet retail clients' claims for compensation because they do not have sufficient financial resources," he said.

"We need to recognise there are some practical limitations in using PI insurance for this purpose. We will use the consultation process to work through these issues, and ensure our final policy takes account of practical issues for licensees and insurers.

"The compensation regime does not provide a mechanism for providing compensation directly to consumers, but helps provide a source of additional financial resources for licensees to meet losses. The regime will not cover all consumer losses relating to financial services. For example, it is not meant to cover loss resulting from the failure of a product issuer."

The regulations will come into effect between January 1 and July 1 next year. The industry has until September 14 to submit views.