The Australian Securities and Investments Commission (ASIC) has introduced interim class order relief allowing brokers to pay money they have received from clients in a single payment into a separate approved account.

The relief, which will last until June 2005, will apply only when a licensed insurer believes a part of the payment constitutes clients’ monies.

Generally a broker can hold client monies – or monies that relate to client transactions – in a Section 981B account only. Non-client monies, such as remuneration payable to the broker, or monies not connected with a financial service or the client’s financial product, must not be paid into these accounts.

Ian Johnston, ASIC’s Executive Director of Financial Services Regulation, says brokers wishing to utilise the relief must:

• hold an Australian financial services licence;
• reasonably believe the payment may comprise, in whole or in part, monies to which sub-section 981A(1) of the Act applies;
• take all reasonable steps to identify non-client monies within five business days of such monies being paid into the account;
• pay out any monies the broker has identified as non-client funds as soon as reasonably practicable, and in all cases, within five days of identifying the monies.

ASIC says it would be reasonable for a broker to assume a payment may comprise client monies if it was paid in connection with a financial service provided by the broker or a financial product held by the broker’s client.

This is because under the Corporations Act, brokers must separate their financial services business from any non-financial services business they may also carry on. 

Mr Johnston says ASIC has provided the relief to offer some “commercial convenience and flexibility” to brokers and consumers when the broker is unable to determine whether a payment contains client monies.

The relief revokes class order 04/189, which provided limited relief to allow the payment of  “mixed monies” containing a hybrid of client monies and non-client monies. The new class order also allows for such concessions.