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07.06.2022

Alert

ASIC waves red flag on REs failing to have PI insurance

In what is a red flag to many AFS licensees struggling to obtain affordable professional indemnity (PI) insurance, or PI insurance at all, ASIC has cancelled the AFS licence held by a responsible entity (RE).

Epic Property Investments Ltd, the RE of two registered managed investment schemes, had not had PI cover since April 2021. While ASIC noted Epic had attempted to obtain the required insurance cover but failed, ASIC considered Epic failed to comply with its obligations on an ongoing basis and was not providing retail clients with the required protection. You can read more about ASIC’s decision here.

The difficulties facing fund managers in obtaining insurance and the appetite for coverage of financial services amongst underwriters was discussed at our latest webinar.


How can we help fund managers?

We have acted for fund managers having difficulty obtaining the required PI cover, including by working with ASIC and getting ahead of the issue. There are various practical and legal steps fund managers can take to manage this risk, including requesting meetings with insurers, seeking variations to their AFSL, or relief from ASIC. These steps should be explored quickly and proactively, to best safeguard fund managers from potential regulatory action, investor claims, and personal liability. 

Reach out to us for help understanding your options and the best way forward.


Authors

Selina Nutley

Selina Nutley

Partner

Elliott Stumm

Elliott Stumm

Partner

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