Commonwealth Numbered Acts

CORPORATIONS ACT 1989 No. 109 of 1989 - SECT 907

907. (1) Subject to this Part, a securities exchange shall hold and apply its
fidelity fund for the purpose of compensating persons who have, whether before
or after the commencement of this Part, suffered pecuniary loss because of a
defalcation, or fraudulent misuse of securities or documents of title to
securities or of other property, by:

   (a)  a member of the securities exchange who, when the loss was suffered,
        was a sole trader;

   (b)  a person who, when the loss was suffered, was a partner in a member
        firm; or

   (c)  an employee of such a member or firm; in respect of money, securities,
        documents of title to securities or other property that, in the course
        of or in connection with that member's or firm's business of dealing
        in securities, was or were entrusted to or received by the member, a
        partner in the firm, or an employee of the member or firm (whether
        before or after the commencement of this Part):

   (d)  on behalf of another person; or

   (e)  because the member, or the firm or a partner in the firm, was a
        trustee of the money, securities, documents of title or other
        property.

(2) Where a right to compensation does not arise under subsection (1), a
fidelity fund may, subject to this Part, be applied for the purpose of paying
to an official receiver or trustee within the meaning of the Bankruptcy Act 
1966 an amount not greater than the amount that the official receiver or
trustee certifies is required to make up or reduce the total deficiency
arising because the available assets of a bankrupt, being a member of a
securities exchange who is a sole trader or being a partner in a member firm
recognised by a securities exchange, are insufficient to satisfy the debts
arising from dealings in securities that have been proved in the bankruptcy by
creditors of the bankrupt.

(3) Subsection (2) applies in the case of a member of a securities exchange or
a partner in a member firm recognised by a securities exchange who has made a
composition with creditors, or has executed a deed of assignment or a deed of
arrangement, under Part X of the Bankruptcy Act 1966 in the same way as that
subsection applies in the case of such a member or partner who has become
bankrupt.

(4) For the purposes of subsection (2) as applying by virtue of subsection
(3):

   (a)  the reference in subsection (2) to a trustee is a reference to a
        controlling trustee within the meaning of Part X of the
        Bankruptcy Act 1966;

   (b)  the reference to debts proved in the bankruptcy is a reference to
        provable debts in relation to the composition or deed within the
        meaning of that Part; and

   (c)  references to the bankrupt are references to the person who made the
        composition or executed the deed.

(5) Where a right to compensation does not arise under subsection (1), a
fidelity fund may, subject to this Part, be applied for the purpose of paying
to a liquidator of a body corporate that is being wound up (being a body
corporate that is a member of a securities exchange) an amount not greater
than the amount that the liquidator certifies is required to make up or reduce
the total deficiency arising because the available assets of the body
corporate are insufficient to satisfy the debts arising from dealings in
securities that have been proved in the winding up by creditors of the body
corporate.

(6) Except as otherwise provided in the following provisions of this section,
the amount or the sum of the amounts that may be paid under this Part:

   (a)  for the purpose of compensating pecuniary loss as referred to in
        subsection (1); or

   (b)  for the purpose of making payments under subsection (2) or (5); shall
        not exceed, in respect of a member of a securities exchange who is a
        sole trader or in respect of a member firm recognised by a securities
        exchange, $500,000.

(7) For the purpose of calculating the amount or sum referred to in subsection
(6), an amount that is paid from a fidelity fund shall, to the extent to which
that amount is repaid to the fund, be disregarded.

(8) If a securities exchange considers, having regard to the ascertained or
contingent liabilities of the fidelity fund, that the assets of the fund so
permit, the securities exchange may, by notice published in the Gazette,
increase the total amount that may be applied from the fund under subsection
(6), and from the date of the publication of the notice until the notice is
revoked or varied the amount specified in the notice is the total amount that
may be applied as provided by this section.

(9) A notice that was published by a securities exchange before the
commencement of this Part under a law corresponding to subsection (8) and had
not been revoked before that commencement shall be deemed to have been
published under that subsection and to relate to the total amount that may be
applied from the fidelity fund of the securities exchange under subsection
(6).

(10) A notice under subsection (8) may be revoked or varied by the securities
exchange by notice published in the Gazette.

(11) If a securities exchange, having regard to the ascertained or contingent
liabilities of the fidelity fund, considers that the assets of the fund so
permit, the securities exchange may apply out of the fund such sums in excess
of the amount limited by or under this section as the securities exchange, in
its discretion, thinks fit in or towards the compensation of persons who have
suffered pecuniary loss as referred to in subsection (1) or making a payment
under subsection (2) or (5).

(12) If:

   (a)  any money, securities, documents of title to securities or other
        property has been entrusted to or received by, a former member of
        securities exchange or an employee of such a former member;

   (b)  because of a defalcation, or the fraudulent misuse of the securities,
        documents of title or other property, by the former member or
        employee, the person by or from whom the securities, documents of
        title or other property was so entrusted or received suffered
        pecuniary loss; and

   (c)  when the money, securities, documents of title or other property was
        so entrusted or received, the person suffering the pecuniary loss had
        reasonable grounds for believing and did believe that the former
        member was a member of the securities exchange concerned; a reference
        in this section to a member of a securities exchange includes a
        reference to that former member.

(13) A reference in this section to an employee of a member or former member
of a securities exchange includes, in the case of a member or former member
that is a body corporate, a reference to an officer of the body corporate.

(14) A reference in this section to a defalcation, or to a fraudulent misuse
of securities or documents of title to securities or of other property, is a
reference to a defalcation, or to such a fraudulent misuse, wherever
occurring.