ASIC has welcomed the passage of client money reforms contained in the Treasury Laws Amendment (Measures No. 1) Bill 2016 (the Bill).

'The amendments to the client money regime made in the Bill have strengthened the protection of client money that is provided to retail derivative clients. Doing so will help to increase investor confidence in the Australian financial system', ASIC Commissioner Cathie Armour said.

The Bill removes an exception in the client money regime that allows Australian financial services licensees to withdraw client money provided in relation to retail OTC derivatives from client money trust accounts, and use it for a wide range of purposes including as working capital. The exception places retail derivative client money at greater risk of loss, particularly in the event the licensee becomes insolvent.

This amendment would require licensees to hold retail derivative client money on trust. The requirement to hold client money on trust already applies to the vast majority of financial products and financial services under Australia's client money regime. 

The Bill also give ASIC a power to write client money reporting and reconciliation rules.

The Bill gives industry a 12-month transition period in which to implement the reforms and adapt to the new regime.

Ms Armour said, 'We look forward to continued engagement with industry to assist industry to implement the amendments made by Parliament, including ASIC's new power to write client money reporting and reconciliation rules'.