Complying with the ASIC Client Money Reporting Rules 2017
Under the ASIC Client Money Reporting Rules 2017 (client money reporting rules), licensees that hold 'reportable client money' are required to comply with a number of record-keeping, reconciliation and reporting requirements. 'Reportable client money' is derivative retail client money other than client money held in relation to derivatives traded on domestic exchanges.
This information sheet (INFO 226) answers the following questions:
- What information should you include in your reportable client money records?
- What information should you include in your reconciliations?
- How do you comply with the other reconciliation requirements?
- What information should you include in your reports to ASIC?
- Can you rely on the exemption for licensees subject to market integrity rules?
Under rule 2.1.1 of the client money reporting rules, a licensee is required to keep accurate records of the amount of reportable client money it is required to hold in a client money account for each client and on an aggregate basis. To satisfy this requirement, a licensee's records should set out the following information:
- the balance of reportable client money owed to each of the licensee’s clients, and
- records of transactions that affect the balance of reportable client money held by the licensee including:
- withdrawals and deposits relating to the purchase and sale of derivatives for, on behalf of, or for the benefit of the client
- withdrawals of client funds in accordance with section 981D of the Corporations Act 2001 (Corporations Act), and
- investment of client funds in accordance with section 981C(a) of the Corporations Act.
Under Part 2.2 of the client money reporting rules, a licensee is required to perform daily and monthly reconciliations of the amount of reportable client money that, according to its records, it is required to hold in a client money account against the amount of reportable client money it is actually holding in that account. A record of a reconciliation performed by the licensee under the client money reporting rules should set out:
- the total balance of reportable client money owed to the licensee's clients
- the total amount of reportable client money which is being held, or has otherwise been permissibly withdrawn or invested, by the licensee, including:
- client money held in the licensee's client money account(s)
- client money held with other brokers (including balances held with each individual broker)
- client money which has been invested in accordance with section 981C(a) of the Corporations Act, and
- client money which has been used in accordance with section 981D of the Corporations Act (noting that retail client money relating to OTC derivatives may no longer be used for this purpose)
- an explanation of any difference between the amount of reportable client money owed to the licensee's clients and the amount being held, or otherwise permissibly withdrawn or invested, by the licensee;
- the time and date to which the reconciliation relates
- the time and date on which the reconciliation was performed, and
- for monthly reconciliations, a signed director's declaration stating that the director believes, and has no reason not to believe, that the reconciliation is accurate in all respects.
We have provided you with an example of a reconciliation record. In addition, it would help if you could also provide an Excel spreadsheet which includes the balances referred to in the reconciliation record.
Under Part 2.2 of the client money reporting rules, licensees are required to perform reconciliations on an aggregate basis and on an individual client basis. A licensee may satisfy these requirements by performing an aggregate reconciliation which is supported by individual client balances.
A licensee is also entitled to nominate a reconciliation time and timezone for the purposes of complying with the reconciliation requirements. The licensee is required to perform daily and monthly reconciliations of the amount of reportable client money it holds as at this nominated reconciliation time on the relevant business day. The licensee must determine its nominated reconciliation time on or before the day the client money reporting rules first apply to the licensee. If a licensee elects to change its nominated reconciliation time, it must notify ASIC in writing before doing so.
A licensee must give ASIC a written report if:
- the licensee fails to perform a reconciliation as required by the client money reporting rules, or
- a daily reconciliation performed under the client money reporting rules identifies a difference (regardless of its significance) between the amount held in a client money account and the amount the licensee is required, under the Corporations Act, to hold in that client money account.
The report given to ASIC must include:
- the paragraph of subrule 3.1.1(1) to which the report relates
- if applicable, the record of the reconciliation
- the details of the failure to perform a reconciliation or the difference found by a reconciliation, including the cause of the failure or difference
- details of any remedial action taken or proposed to be taken by the licensee, including how the licensee has addressed or is planning to address
- the problem which led to the difference or failure
- any deficiency or surplus in client funds.
The reports may be sent by email to email@example.com.
Participants of ASX 24 and FEX are eligible for an exemption from the reconciliation requirements under the client money reporting rules to the extent they are required to comply, and actually comply, with Part 2.3 of the ASIC Market Integrity Rules (ASX 24 Market) 2010 (ASIC Market Integrity Rules (ASX 24)), the ASIC Market Integrity Rules (FEX Market) 2013 or the ASIC Market Integrity Rules (Futures Markets) 2017.
Specifically, reconciliations performed by these market participants under the client money reporting rules need not include amounts of reportable client money already covered by reconciliations market participants are required to perform under these market integrity rules. For example, where an ASX 24 market participant includes the client money it receives for trading in overseas futures in the reconciliations it performs under the ASIC Market Integrity Rules (ASX 24), it will not be required to include this overseas futures money in any reconciliations it performs under the client money reporting rules.
In addition, and for the avoidance of doubt, if the participant's total balance of reportable client money is required to be included in reconciliations it performs under these market integrity rules, then it is not required to comply with the client money reporting rules.
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law on that topic, and it is not a substitute for professional advice. You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.