Corporations Regulations 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

PART 7.8 - OTHER PROVISIONS RELATING TO CONDUCT ETC CONNECTED WITH FINANCIAL PRODUCTS AND FINANCIAL SERVICES, OTHER THAN FINANCIAL PRODUCT DISCLOSURE  

Division 2 - Dealing with clients ' money  

Subdivision A - Money other than loans  

REGULATION 7.8.02   ACCOUNTS MAINTAINED FOR SECTION 981B OF THE ACT  
Withdrawals from account

7.8.02(1)    

For paragraph 981C(1)(a) of the Act, payments may be made out of an account maintained for section 981B of the Act in any of the following circumstances:

(a) making a payment to, or in accordance with the written direction of, a person entitled to the money (subject to regulation 7.8.02A );

(b) defraying brokerage and other proper charges;

(c) paying to the financial services licensee money to which the financial services licensee is entitled (subject to regulation 7.8.02A );

(d) making a payment of moneys due to an insurer in connection with a contract of insurance;

(e) making a payment that is otherwise authorised by law;

(f) paying to the financial services licensee money to which the financial services licensee is entitled pursuant to the market integrity rules or the operating rules of a licensed market.

7.8.02(1A)    

For paragraph 981C(1)(a) and subparagraph 981B(1)(b)(iv) of the Act, if, under paragraph (1)(a), a financial services licensee (the paying licensee ) withdraws money from an account maintained for section 981B of the Act and pays it to another financial services licensee (the receiving licensee ):

(a) the paying licensee must ensure that the receiving licensee is notified, at the same time as the payment is made or as soon as practicable, that the money:

(i) has been withdrawn from an account of the paying licensee maintained for section 981B of the Act; and

(ii) should be paid into an account of the receiving licensee maintained for section 981B of the Act; and

(b) not later than the day after the receiving licensee receives the payment, the receiving licensee must pay the money into an account of the receiving licensee maintained for section 981B of the Act.

Permissible investments

7.8.02(2)    

For paragraph 981C(1)(a) of the Act, and subject to subregulations (3), (4) and (5), the following kinds of investment may be made in relation to an account maintained for section 981B of the Act:

(a) investment in any manner in which trustees are for the time being authorised by law to invest trust funds;

(b) investment on deposit with an eligible money market dealer;

(c) investment on deposit at interest with an Australian ADI;

(d) the acquisition of cash management trust interests;

(e) investment in a security issued or guaranteed by the Commonwealth or a State or Territory;

(f) investment on deposit with a licensed CS facility.

7.8.02(3)    
A financial services licensee must not invest an amount in a way permitted by subregulation (2) unless:

(a) the financial services licensee has obtained the client's written agreement to the following matters:

(i) the making of the investment;

(ii) how earnings on the investment are to be dealt with (including whether or not the earnings are to be shared, and whether or not the earnings are to be paid into the account);

(iii) how the realisation of the investment is to be dealt with (including whether or not the capital invested, and the proceeds of the investment, are to be deposited into the account);

(iv) how any losses made on the investment are to be dealt with (including the circumstances in which the financial services licensee is required to pay an amount equal to the difference between the amount invested and the amount received, into the account or otherwise);

(v) the fee (if any) that the financial services licensee proposes to charge for the investment; and

(b) the money is money to which the client is entitled.

Note: The investment arrangement may be a managed investment scheme.

7.8.02(4)    

For paragraph 981A(4)(a) of the Act, subregulation (3) does not apply to money to which subregulation 7.8.01(4) applies.

7.8.02(5)    
In subregulation (2):

investment
does not include the making of an investment in accordance with the specific direction of a client.

Note: Paragraph (1)(a) deals with the withdrawal of money from an account in accordance with the written direction of a person entitled to the money.

7.8.02(6)    

For paragraph 981C(1)(b) of the Act, in relation to moneys received in relation to insurance products, the financial services licensee must ensure that:

(a) the balance of moneys in an account maintained by the financial services licensee under section 981B of the Act; and

(b) the total amount previously withdrawn from the account and currently invested under subregulation (2);

is at least the sum of:

(c) any amounts that an insurer is entitled to receive from the account; and

(d) any amounts that an insured or intending insured is entitled to receive from the account.

7.8.02(6A)    

For paragraph (6)(c), if, at a particular time, money received by a financial services licensee for or on account of an insurer as mentioned in paragraph 7.8.01(4)(a) is paid into the account, the insurer is taken to be entitled to receive payment of:

(a) the amount; or

(b) if any deductions from the amount are authorised by a written agreement between the insurer and the broker - the amount less the deductions;

throughout the period:

(c) beginning at that time; and

(d) ending when the payment is actually made to the insurer;

whether or not the amount has been invested under subregulation (2).

7.8.02(6B)    

For paragraph (6)(d), if, at a particular time, money received by a financial services licensee for or on account of an insured or intending insured as mentioned in paragraph 7.8.01(4)(b) is paid into an account, the insured or intending insured is taken to be entitled to receive payment of the amount throughout the period:

(a) beginning at that time; and

(b) ending when the payment is actually made to the insured or intending insured;

whether or not the amount has been invested under subregulation (2).

7.8.02(6C)    

On application by a financial services licensee in the prescribed form, ASIC may consent in writing to the minimum balance of monies received in relation to insurance products being less than the level specified in subregulation (6).

7.8.02(7)    

For paragraph 981C(1)(c) of the Act, if money is held in an account maintained for section 981B of the Act:

(a) the financial services licensee is entitled to the interest on the account; and

(b) the interest on the account is not required to be paid into the account;

only if the financial services licensee discloses to the client that the financial services licensee is keeping the interest (if any) earned on the account.

Interest and other earnings on investments

7.8.02(8)    

For paragraph 981C(1)(d) of the Act, interest or other earnings on:

(a) an investment of money withdrawn from an account maintained for section 981B of the Act; or

(b) the proceeds of the realisation of such an investment;

must be dealt with in accordance with the written agreement between the financial services licensee and the client under subregulation (3).