Chris Pearce, the Parliamentary Secretary to the Treasurer, has
announced that a regulation to complement section 912B of the Corporations Act 2001
(the Act) is expected to be made by 1 July 2007 (when the current class order giving transitional relief ends).

The Act requires
financial services licensees that provide financial services to retail
clients to have in place appropriate compensation arrangements. The
arrangements must either be approved by ASIC, or satisfy the
requirements specified in the regulations.

The proposed regulation will specify that section 912B is satisfied
if licensees have professional indemnity insurance in place. Certain
bodies which are regulated by the Australian Prudential Regulation
Authority will be exempt from this requirement.

The regulation will also include transitional provisions and
provisions relating to the return of the security bonds held by the
Australian Securities and Investments Commission (ASIC).

The regulation will be supplemented by ASIC guidance. The draft
guidance note, which will assist licensees to put appropriate
arrangements in place, will be released by ASIC for public consultation
at the time the regulation is made.

A draft regulation was issued in November 2006.

The draft regulation will be amended in the light of the submissions
received.  Changes generally relate to areas of misunderstanding and
ambiguity in the draft regulation, and the proposed requirement for
licensees to disclose their arrangements in their Financial Services
Guide.