Compensation funds
Compensation funds
The National Guarantee Fund (NGF) is the compensation fund for certain losses incurred by investors who trade in shares on ASX.
The NGF applies only in specific circumstances and does not compensate investors for trading losses including those caused by market events or by investment choices based on poor advice.
You should always take care to inform yourself and to take any advice that you require before investing.
The NGF is administered by Securities Exchanges Guarantee Corporation Limited (SEGC). Further information about the NGF (including the circumstances in which a claim may be made on the NGF) and SEGC is available at the SEGC website.
On 14 June SEGC published a notice concerning the extension of time for lodgement of claims in relation to BBY Limited (In liquidation)(Receivers and Managers Appointed). Further information and a copy of that notice is available on SEGC’s website.
ASX also maintains the ASX Supplemental Compensation Fund and the SFE Fidelity Fund. These compensation funds relate to ASX's futures markets.
The Compensation Scheme of Last Resort (CSLR) is an important piece of the external dispute resolution framework in Australia. CSLR is an independent, not-for-profit organisation authorised by the Australian Government to perform its role.
They can provide compensation of up to $150,000 to victims of financial misconduct where compensation is not available from other sources.
The scheme covers specific financial products and services delivered to retail clients. More information and examples of financial misconduct can be found on the eligibility page of the CSLR website.
Sydney Futures Exchange Limited (SFE) maintains compensation arrangements, to provide a fidelity fund for losses suffered by clients of SFE participants where a client has given money or other property to a participant in connection with effecting a transaction on SFE and the participant has misappropriated or fraudulently misused the money or other property.
Compensation is not available for trading losses or for losses arising as a result of poor advice given by a futures broker.
The Board of SFE manages SFE's fidelity fund. Moneys in the fidelity fund are held on trust by SFE for the purposes for which the fund was established, and are kept separate from the funds of SFE.
Persons who are entitled to make a claim against a fidelity fund are clients who have suffered loss because of misappropriation or fraudulent misuse of money or other property by a participant of SFE Corp or of SFE, or by a director, partner, officer or employee of such a participant, where the participant or the person received the money or property in connection with dealing in futures contracts.
A successful claimant will, subject to the limits on payments, be entitled to receive from a fund the amount of the actual loss, all reasonable costs in making and proving the claim and interest on the actual loss (less any benefit which may be received from any other source in reduction of the loss).
The fund may pay compensation as follows in respect of a claim or claims arising from a particular event or set of related events:
A person will not have a claim against the fund in where the money or property has, in the due course of administration of a trust, ceased to be under the sole control of a participant.
A claim which is made in accordance with the procedures below will be considered by the board or a management committee appointed by the board, which has power to settle proper claims for compensation out of the relevant fidelity fund.
If the board (or the management committee) settles the claim, payment of the appropriate amount will be made as soon as possible. If the board disallows a claim, the claimant may apply to the Court for leave to commence proceedings against the exchange.
An application for compensation from a fidelity fund should be in writing and present the material facts in a clear and logical manner. There is no specific form of application, but the claimant should provide the information set out below to the Company Secretary:
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.
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.
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.
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.
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.
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.
All Claims to be sent to the Secretary of the Claims Review Panel
Secretary, Claims Review Panel
ASX Limited
PO Box H224,
Australia Square,
NSW 1215
Attention: Company Secretary
You can download the claim form here.
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, compensation funds are required 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.
This information is general information only and has been prepared to provide a basic outline of the operation of the compensation funds. It is not intended as a precise statement of the legislative provisions and regulatory framework that govern the operation of the compensation funds and the availability of claims. Specific legal advice should be sought as to the operation of the compensation funds in individual circumstances. To the extent permitted by law, ASX excludes all liability for any loss or damage arising in any way including by way of negligence
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 access information about the steps ASX recommends you take when attempting to resolve a dispute with your stockbroker.