Cynical Govt should pay for CSLR cost blow-out
EDITORIAL
The Government’s announcement of a Treasury review of the Compensation Scheme of Last Resort (CSLR) must, frankly, be regarded as a cynical pre-election attempt to quieten a financial advice profession which is justifiably outraged by the soaring costs of the scheme.
The reality is that the Financial Advice Association of Australia (FAAA) has already identified what is wrong with the CSLR and, in large measure, blame can be laid at the feet of Treasury bureaucrats and misguided regulators sitting inside the Australian Securities and Investments Commission (ASIC).
To be clear, those running the CSLR are not responsible for the situation now facing the financial advice profession – those responsible are the people who devised the underlying funding and then conveniently moved the goal posts.
If the Government genuinely cares to inject some equity into the situation then the departing Assistant Treasurer and Minister for Financial Services, Stephen Jones, should make a ministerial decision that sees the Commonwealth pick up the tab for the $50 million blow-out in the cost of the scheme.
That $50 million is the amount above the $20 million sub-sector cost attributable to personal advice and it is entirely within the discretion of the minister to recommend to his Cabinet colleagues that it not be imposed on financial advisers.
As the CSLR chief executive, David Berry, has pointed out, the bulk of the blow-out is attributable to claims flowing from the collapse of Dixon Advisory and, as the FAAA has persistently pointed out, the CSLR was never envisaged as being retrospective and therefore claims relating to Dixon Advisory should have been out of scope.
Just to make life easier for the Treasury officials who will be overseeing the review of the CSLR, the following represent some of the most salient points made by the FAAA regarding the scheme.
“Ultimately, however the CSLR is a government initiative and the FAAA firmly believes that the Federal Government has let the financial advice profession down in the design and implementation of the scheme. Three of our most significant concerns have been: • the retrospective application of the scheme,
- the Government only paying for the first three months, rather than 12 months as initially committed, and
- the failure to appropriately disclose what the CSLR would cost and what the likely implications and consequences were.”
For completeness, Financial Newswire will add the issue of the Australian Securities and Investments Commission (ASIC) front-end loading claims to the CSLR by directing Dixon Clients to file complaints with the Australian Financial Complaints Authority (AFCA) before the scheme was even legislatively established.
Stockbrokers and Investment Advisers (SIAA) chief executive, Judith Fox is entirely right to urge urgent change to the scheme but the reality is that any Treasury review will not be completed before the Federal Election.
The Commonwealth has created the circumstances of the blow-out and equity dictates that the Commonwealth should pay.
There needs to be a four corners investigation. Who are the mighty and powerful Dixon clients that want money. Why was the regulator (AGAIN) blind and asleep at the wheel ignoring the warning signs, the corruption of the intent and design of the legislation, the dangers of moral hazard.
The one I really can’t get my head around is how was the advice business simply lifted out of the operating entity and placed somewhere else.
Not an expert, nor a lawyer, but my understanding is any transaction made with the knowledge of a liability, even if contingent, can be reversed by the court in the case of bankruptcy. The business, whilst impaired, would have still been worth millions.
What is going on???
I agree wholeheartedly. The advice business transferred would surely have been worth something like $30-50m. It would have gone a long way towards compensating victims and reducing the burden of the CSLR. It’s a textbook case of phoenixing. ASIC and the ATO should be making an example of them, but all we hear is crickets. It is very suspicious. Smacks of corruption at the highest levels.
who watches for Coners anymore? you need a podcaster to get hold it. The worlds changed! ABC irrelevant
It’s even worse than what you think Wildcat.
Post the merger of Dixon’s and Evans and Partners all the Authorized Representatives were transitioned to the “New” Entity while continuing to give advice that was the responsibility of the “Old” entity.
When Dixon’s was placed into Administration it had, for a long time, No Authorized Reps, no staff, no management.
You can’t Phoenix something that hadn’t been there for a long time.
Get your head around that one.
Nerida Cole, please take the stand.
Previous head of Dixon’s Advisers.
On Dixon’s investment selection board.
Then employed at Treasury when the dodgy CSLR has been implemented.
How do such actions escape any real scrutiny ??
Agree thats a doozy!
The CSLR should be scrapped. The CSLR is a moral hazard. If the risk is now spread to 3rd parties there is no incentive for bad actors to decrease their risk.
Meanwhile over at ASIC Levy land.
The Securities Dealers graduated fee has exploded.
FY 19 20 3c
FY 20 21 5c – 66.6% increase
FY 21 22 15c – 200% increase
FY 22 23 18c – 20% increase
FY 23 24 25c – 38.9% increase
So in 5 yrs the fee has gone up 733% This is BS. This is a total rip! Plus add $1,000 min fee to this
Typical mismanagement of the economy by yet another useless labour government. Here we are once again picking up the tab for these fraudsters who damage the economy and leave us all in debt on the edge of a recession every time they are given a chance.
Jones rocks Financial Services and imposes costs they created through mismanagement and ecpects the honest hardworking planner to pick up the bill for them.
If imposed I will join a class action to claim compensation against this government and ASIC for this. This organisation has got to go. They’re not a regulator there just another tax collector.
I will not pay for their f….Ups