The ASX Supplemental Compensation Fund (the Fund) is designed to provide a degree of financial protection for retail clients who have entrusted property to a stockbroker in respect of actual or proposed dealings in futures on ASX Limited (ASX).
This is a brief overview of the provisions governing the operation of the Fund, in particular the key sections that deal with your rights to make a claim. You should not rely on the information set out below as legal advice, or as a precise definition of your right to make a claim through the Fund, or limits on those rights in a particular case. If you have any doubts about whether the Fund will protect you in a particular circumstance you should seek specific legal advice.
What is the ASX Supplemental Compensation Fund
The Fund is designed to provide fidelity protection to retail investors arising out of business in connection with the ASX futures market.
The initial amount of the Fund is $2,000,000. If the amount of the Fund falls below $2,000,000, further funding will be provided by levies on Market Participants in accordance with the rules of the Fund and the Corporations Act.
The relevant legislation that deals with Approved Compensation Arrangements is Division 3 of Part 7.5 of the Corporations Act 2001 and the regulations in respect of those provisions. In particular section 885C (which is subject to section 885D) outlines the losses to be covered.
What types of claims can be made?
The Fund is essentially a fidelity fund. Claims on the Fund are likely to be made by clients of Market Participants (stockbrokers) who have trading permission to deal in futures on behalf of clients.
The Fund is designed to deal with claims that arise from a client suffering a loss as a result of giving money or other property to a stockbroker and that money or property being misappropriated. Also covered is the situation where a client gives a stockbroker authority over property and there is subsequent fraudulent misuse of the authority by the stockbroker.
What is the time limit on claims?
Generally a claim for compensation from the Fund must be made within 6 months after the claimant became aware of the relevant loss. However ASX may, by publishing a notice in a daily newspaper circulating generally in each State and Territory, set a different time limit for claims which relate to a specific person, firm, circumstance or set of circumstances referred to in that notice. This time limit will be at least 3 months after the date of publication of the notice.
Claims not made within those time limits are barred unless ASX or the Claims Review Panel otherwise determines.
How long will it take to process claims?
While the length of time that will be required to process and determine a claim will depend on the particular circumstances of a particular case and the adequacy of the information provided in support of the claim, ASX's current intention is that a claim would be determined within 6 months of a valid notification of the claim to ASX.
What is the money limit on claims?
1. Claims in respect of the fraudulent misuse or defalcation of money or property by a single Market Participant will be limited to $1,000,000;
2. Any series of Claims arising out of the same set of circumstances will be limited to $1,000,000;
3. the maximum amount payable to any one claimant arising out of a single set of circumstances will be limited to $100,000. In this regard a Claim will be considered to arise out of the same circumstances if it arises out of property having been given or entrusted to a single Market Participant.; and
4. Claims will be pro-rata where the Fund is insufficient to meet all claims.
Product Coverage of claims
At this stage, of the products which are currently traded on ASX's market, potential claims under the Compensation Arrangement will only arise in respect of money or property entrusted to a Market Participant in respect of actual or proposed dealings in futures.
Copy of the required claim form
All Claims to be sent to the Secretary of the Claims Review Panel
Secretary, Claims Review Panel
PO Box H224,
Attention: Company Secretary
General Guidance as to the time frame to process a claim
The Claims Review Panel must consider claims notified in a reasonable time having regard to the information provided in support of the claim and the circumstances of the claim.
To enable processing of claims, the Fund is required to collect personal information. Where possible, collection will occur from the individual, but it may be necessary to collect information from share registries, brokers, the Australian Stock Exchange and its subsidiaries, among others. It will only use that personal information for the primary purpose for which it was collected and will only disclose that information in the course of processing a claim.
In most cases, if you have a complaint about your stockbroker, you should first discuss the problem with the stockbroker. If you have a complaint you may wish to use the link below to access information about the steps ASX recommends you take when attempting to resolve a dispute with your stockbroker. Further information on broker complaints.
This information is general information only and has been prepared to provide a basic outline of the operation of the ASX Supplemental Compensation Fund. It is not intended as a precise statement of the legislative provisions that govern the operation of the Fund and the availability of claims. Specific legal advice should be sought as to the operation of the Fund in individual circumstances.