A targeted review of professional indemnity insurance held by 56 financial services licensees shows only three did not comply with defence cost regulatory requirements, according to the Australian Securities and Investments Commission (ASIC).

The three have since obtained improved covers or are doing so.

The review focused on the adequacy of cover for legal defence costs, fraud and dishonesty in policies offered by two insurance companies to the small licensees.

“We found, generally, the small licensees we reviewed had policies with an overall indemnity limit that complied with requirements,” the regulator says.

ASIC undertook the review after a report in 2015 indicated small advice licensees have the highest risk of holding inadequate professional indemnity cover, particularly for legal defence, fraud and dishonesty.