The Commonwealth Treasury


COMPENSATION FOR LOSS IN THE FINANCIAL SERVICES SECTOR ISSUES AND OPTIONS September 2002

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Table of contents

Foreword

Table of contents

Abbreviations and terms used

Overview

Background

Structure of the paper

Procedure

Principal issues

Secondary issues

Chapter 1: Introduction

A: The compensation review

B: Origins of the review

C: This issues and options paper

D: The consultation process

Chapter 2: The problem and objective

A: What is the problem to be addressed?

B: Why is government action needed to correct the problem?

C: What is the objective of government action?

D: Will compensation arrangements help to achieve this objective?

E: Should compensation arrangements be required by legislation?

F: Conclusion

Chapter 3: Current Australian compensation requirements

A: Description

B: Problems

Chapter 4: The purpose and design of compensation arrangements

A: What is the purpose of a compensation regime?

B: Designing a compensation regime

Chapter 5: Coverage

A: The conduct

B: The cause of the loss

C: The claimants

D: Measure and nature of compensation

E: Mechanisms to provide compensation

Chapter 6: Financial services licensees

A: Responsibility

B: Mechanisms

C: What should the mechanism adopted be required to cover?

D: Conclusion

Chapter 7: Market licensees

A: Should market licensees be required to make compensation arrangements?

B: If market licensees continue to be required to make compensation arrangements

C: A consolidated market scheme?

D: CS (clearing and settlement) facility licensees

Chapter 8: Is a broad statutory scheme warranted?

A: Is a broad statutory scheme warranted?

B: In what circumstances should a broad statutory scheme apply?

C: The CASAC proposal

D: Overseas schemes

Chapter 9: Subsidiary issues relating to statutory schemes

A: Who would operate the scheme?

B: Reporting and governance issues

C: Would the one scheme cover all financial services and all financial products?

D: How would it be funded?

E: What should be its statutory powers?

Chapter 10: Other issues

A: Treatment of APRA-regulated bodies and those with high financial requirements

B: Measure and nature of compensation

C: Should there be capping of payments?

D: What form of capping is appropriate?

E: Subrogation

F: Connection with Australia

G: Relationship with external dispute resolution schemes

H: Excess funds

I: Should there be time limits for claiming?

J: Level of detail in the legislation

Chapter 11: Options

Option A

Option B

Option C

Option D

Option E

Option F

Option G

Option H

Chapter 12: Conclusion

Attachment A: Outline of financial services licensing regime

A: Licensing of financial service providers

B: Financial service provider conduct and disclosure

Attachment B: Current compensation mechanisms in the financial services sector in Australia

A: Requirements imposed on exchanges/financial markets

B: Requirements imposed on financial services providers

Attachment C: The origins of the National Guarantee Fund

Attachment D: Comparison of international compensation schemes

Attachment E: The current professional indemnity insurance market