Today the Hon Ross Cameron MP, Parliamentary Secretary to the Treasurer, released for public comment a consultation paper on splitting the National Guarantee Fund.
The National Guarantee Fund, which is held by a subsidiary of the Australian Stock Exchange Limited, currently performs two functions – investor protection and clearing support. This is an anomalous situation.
The proposal involves:
- retaining sufficient money in the Fund to meet current and future claims by investors which meet the criteria;
- payment to the Australian Stock Exchange's clearing house of an amount from the Fund which would be used for clearing support.
It is envisaged that conditions would be imposed on the payment from the Fund and on the licence of the clearing house to make sure, to the extent possible, that the funds were used as intended.
The consultation paper outlines the application from the Australian Stock Exchange and the proposed response. It raises a number of issues on which comments are sought from the public, including: the justification for the proposed split; the calculation of the amount needed to be retained; capping of payments; conditions; and possible amendments to the Corporations Act 2001 and Corporations Regulations.
It is expected that this issue will interest brokers, investors and other stakeholders. Mr Cameron urged all who are interested in this issue to respond.
Responses will need to be received by the Department of the Treasury by close of business on 5 March 2004.
The paper is available on the Treasury website.
Editor's note: The National Guarantee Fund (NGF) was formed in 1987 from portions of the State Exchanges' fidelity funds. It was formed at the same time as the Australian Stock Exchange Limited (ASX). The NGF is administered by the Securities Exchange Guarantee Corporation Limited (SECG), a wholly owned subsidiary of the ASX. Funds are available only in connection with ASX brokers and transactions.