The Australian Securities and Investments Commission (ASIC) has admitted that some financial advisers are facing troubles getting professional indemnity (PI) insurance.

The commission acknowledged the troubles during the overview of licensing and professional registration applications.

ASIC says advisers should start registration on time

After pointing out that the advisers are facing issues getting a PI license, the commission advised advisers who want to reduce the issues to start applying and getting the necessary documentation on time. According to ASIC, earlier preparation will ensure that issues that may come ahead will be treated before they impact their licensing timeframe.

ASIC also said those interested in getting a PI insurance license should consider other requirements that may cause difficulties and delays during the process.

Also, the commission reminded companies to have an adequately structured insurance program that can respond to situations. It pointed to the landmark fines of $75 million imposed against three CFD providers by Australian courts as an example.

Although the fines on the three CFD firms are not a reflection of the average risk of other firms, CISA has admonished AFSL holders to manage their regulatory risk and take a Statutory Liability Policy in that regard.

ASIC is looking for a solution

Cathie Armour of ASIC, during the recent ASIC Market Liaison Forum, stated that the commission is aware of the issues facing firms looking to obtain PI insurance licenses. She said the commission is looking into the situation to find a lasting solution.

ASIC said no conclusion has been reached, as it has been trying to review whether the PI insurance is relevant for the industry and financial system. According to ASIC, the issues identified include the complexity of PI policy terms as well as policies involving a high excess compared to the premium. ASIC also considers the retail OTC derivatives market and wants PI insurance to be an important insurance area for the market.

Also, the attendees were not given any details about the participants of the financial services like shareholders. However, there are other considerations, including the statutory liability policy, which can provide liability for employees, senior management, and the entire company. The liability can cover any allegations of wrongful breaches while offering professional services. It could also extend to the supplementary legal expenses.

To reduce IP license difficulties, ASIC has advised companies to their present insurance registration program with their broker to make sure they are not confused about any exclusions or inclusions.