ASIC has announced that Societe Generale Securities Australia Pty Ltd (SGSAPL) has pleaded guilty to client money offences which occurred between 8 December 2014 and 8 February 2017.
SGSAPL pleaded guilty to:
- Two counts of breaching section 993B(1) of the Corporations Act 2001 by receiving money in connection with financial services, and then failing to pay that money into an account that satisfied the client money requirements within s981B; and
- Two counts of breaching section 993C(1) of the Corporations Act 2001 through making payments out of a client money account that were not permitted by reg 7.8.02 of the Corporations Regulations.
Each offence carries a maximum penalty of 250 penalty units ($52,500).
The matter has been listed for sentence on 21 September 2020.
ASIC has previously imposed additional conditions on the Australian financial services (AFS) licence of SGSAPL to ensure compliance with client money regulations.
What is “client money”?
Client money is defined as money paid to a financial services licensee in connection with a financial service that has been provided, or will or may be provided, or in connection with a financial product.
These provisions do not apply to money deposited with financial institutions to be credited to deposit products.
Client money must be paid into a client money account that meets the requirements of the Corporations Regulations and AFS licence holders can only make payments out of a client money account as specified by the Corporations Regulations.
Division 2 of Part 7.8 of the Corporations Act sets out the obligations of licensees in relation to client money.
For money other than loans, licensees are required to establish and maintain a separate trust account in which to hold client money. A financial services licensee must hold all money paid into the account on trust for the benefit of the person who is entitled to the money.
The following is not client money:
• money received as remuneration;
• money paid to reimburse a licensee for payments made to acquire a financial product or to discharge liabilities incurred by a licensee relating to the acquisition of a financial product ;
• money paid to acquire a financial product issued or sold by the licensee; or
• money paid by way of a loan.
Accounts established to hold client money must be with an Australian ADI and must be designated as an account for this purpose.
Only client money, interest on client money, and proceeds from the investment of client money may be paid into accounts. Money must be paid into accounts on either the day it is received by the licensee or the next business day.
Money may be withdrawn from an account in the following circumstances:
• to make a payment to, or in accordance with the written direction of, a person entitled to the money;
• to defray brokerage or any other proper charge;
• to pay to the licensee money to which the licensee is entitled, being money that was paid into the account but need not have been so paid;
• to pay to an insurer money due in connection with a contract of insurance;
• to make a payment that is otherwise authorised by law; or
• pay to the financial services licensee money to which the licensee is entitled pursuant to the operating rules of a licensed financial market.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
