Corporations Act 2001
Note: This Chapter applies to a CCIV in a modified form: see Division 4 of Part 8B.7 .
View history note
Hide history noteSubject to section 885D , the compensation rules must cover losses ( Division 3 losses ) of a kind described in the following paragraphs: (a) a person (the client ) gave money or other property, or authority over property, to a person (the participant ):
(i) who was a participant in the market at that time; or
(b) the money or other property, or the authority, was given to the participant in connection with effecting a transaction, or proposed transaction, covered by provisions of the operating rules of the market relating to transactions effected through the market; and (c) the effecting of the transaction through the market constitutes or would constitute the provision of a financial service to the client as a retail client; and (d) the client suffers a loss because of:
(ii) who the client reasonably believed to be a participant in the market at that time and who was a participant in the market at some earlier time; and
(i) if the client gave the participant money or other property - the defalcation or fraudulent misuse of the money or other property by the participant; or
(ii) if the client gave the participant authority over property - the fraudulent misuse of that authority by the participant.
885C(2)
The compensation rules must provide that a claim relating to an alleged loss caused by defalcation or fraudulent misuse may be allowed even if: (a) the person against whom the defalcation or misuse is alleged has not been convicted or prosecuted; and (b) the evidence on which the claim is allowed would not be sufficient to establish the guilt of that person on a criminal trial in respect of the defalcation or fraudulent misuse.
885C(3)
The compensation rules may exclude losses of a kind described above that occur in specified situations. However, the compensation arrangements will not be adequate unless ASIC is satisfied that those exclusions are appropriate.
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