The Australian Securities and Investments Commission (ASIC) is continuing to fine-tune the Financial Services Reform Act, announcing a new class order to allow Australian financial services licensees to pay clients’ money into a cash common fund.

The Corporations Act 2001 requires a licensee to pay clients’ money into an account with an Australian authorised deposit-taking institution or a cash management trust. Cash common funds operate in a similar way to cash management trusts regulated by ASIC, but are also subject to additional regulation by state governments.

Under the class order, clients’ money must be paid into an account that is with an authorised trustee corporation, relates to an interest in a registered scheme operated by that corporation, and is commonly known as a cash common fund.

National Insurance Brokers Association consultant John Hanks says the ASIC move allows more choice for brokers, but there are limits to what accounts they can invest in.

“It is not groundbreaking – it simply increases the range of investment options for money in a broker’s account,” he said.

Mr Hanks says brokers can hold money in a trust account for 90 days from the inception of a policy, although in some cases the insurer may prefer the money to be passed on earlier.