Legislation and proposed legislation

Government consults on draft client money reforms

The Government’s proposed reforms aim to deliver on its commitment to better protect client money by offering greater protection for retail clients of financial services providers, whilst still facilitating the ongoing efficiency of the wholesale derivatives market.

Following the release in December 2015 of the Government’s Policy Paper - Enhanced Protection of Client Money, the Government has now released exposure draft legislation to reform the Australian regulatory framework governing how financial services providers must deal with certain property and money that they receive from clients (contained in Divisions 2 and 3 of Part 7.8 of the Corporations Act 2001 (Cth) and Regulations 7.8.01 to 7.8.07 of the Corporations Regulations 2001 (Cth)).

The reforms proposed under the exposure draft Corporations Amendment (Client Money) Bill 2016 and the exposure draft Corporations Amendment (Client Money) Regulation 2016 give effect to the proposals made in the Policy Paper and:

  • offer greater protection to retail clients by requiring financial services providers to hold all derivative retail client money and property in trust, and only use it to meet obligations incurred by the provider in connection with dealings in the derivative where the obligation is incurred under market integrity rules or the operating rules of a licensed market or clearing and settlement facility; and
  • facilitate the ongoing efficiency of the wholesale derivatives market and ensure that the regime does not impose unnecessary limitations on institutional investors by allowing wholesale clients to contract out of the client money regime if they wish to.

The Government has also stated that the proposed changes will better align the Australian client money regime with international best practice and community expectations of consumer protection.

See the Explanatory Memorandum and Explanatory Statement for further information.

See also media release dated 29 February 2016.