Govt bail-out never an option with CSLR
ANALYSIS
The degree to which the legislation underpinning the Compensation Scheme of Last Resort (CSLR) funding arrangements has exclusively targeted the narrow cohort of financial advisers, credit intermediaries, and securities dealers has been laid bare by the Treasury.
The Treasury consultation paper dealing with exceeding the financial advice sub-sector levy cap also makes clear that those who designed the legislation made sure that neither the Government nor other financial services sectors would be asked to pay a price.
Indeed, the Treasury consultation paper makes clear that, under the terms of the legislation, there cannot and will not be a government bail-out.
It states, quite bluntly, “the legislative framework does not contemplate the Commonwealth’s making a financial contribution to deal with an excess claims, fees and costs estimate” with the option simply not being available.
“The legislation provides for the Commonwealth to pay the CSLR’s costs for the first levy period (which ran from 2 April to 30 June 2024). But beyond that point, section 1069P sets out the funding sources of the CSLR operator (that is, the amounts ASIC has collected under the CSLR Levy (Collection) Act),” it said.
What is interesting about the Treasury consultation paper is that it actually does canvass the option of spreading a special levy for the full amount of the excess across “multiple retail-facing sub-sectors” and then provides illustrative estimates of what it would cost sectors such as Managed Discretionary Account providers, superannuation funds and responsible entities.
Those estimates confirm what financial advisers will already know – that the cost of the levy will inevitably be commensurately lower if the burden is equally spread across retail-facing sectors.
The consultation paper states that while the excess costs for the current financial year will be dealt with within the existing legislative framework, “Treasury invites stakeholder views on whether alternative options exist that could be considered by Government”.
“For example, if options to spread the excess costs across ‘retail-facing sub-sectors’ are appropriate, then an appropriate metric for apportioning a special levy may be the number of retail clients served by each sub-sector. This would ensure sub-sectors with more exposure to retail clients bear more of the cost,” it said.
“Entities do not currently report to ASIC on the number of retail clients they have (or had during a reporting year) and no reliable alternative estimates of these numbers exists. However, if entities in retail-facing sub-sectors were required to report to ASIC the number of retail clients with whom they had dealings each financial year, this could be used to apportion a special levy.”
Good people paying for other people’s wrongdoings. Sounds about right.
The wrongdoers aren’t walking away poorer are they.
Whilst Section 1069H does not specify Government funding as an option to cover a special levy, neither does it specifically exclude it from happening. This statement in the consultation paper is simply positioning seeking to exclude this option from being canvassed.
I have no doubt that if one of the richest people or companies in Australia offered to contribute $50m to the scheme, that it would be possible for the CSLR to accept that money and avoid the need to issue a special levy.
The CSLR whole concept and design of this Govt from innocent Advisers is beyond disgusting.
ADVISERS MUST ALL REFUSE TO PAY
Good advisers do not show up at work every day, take on all the compliance, market and businesses stresses in order to help their clients to find the money paid to them, after all their costs to run these days, is depleted due to them also having to pay for the crooks. This problem is an ethical one of which good advisers have already been burdened with CPD points and Education requirements on ethics and has all this made a difference to the CSLR blowout? NO. If the crooks are out to steal money from the public they will not be deterred or change their ethical values due to ethical education or compliance requirements – they will fake it and cheat until they are caught – or should I say if they are caught – we all know this. In what other profession do the good businesses have to pay for the unethical behaviour of bad people? I’m in shock this is even something that was ever proposed let alone still being discussed years later. Of course its going to blowout people! I’m back at the beginning when the CSLR was much less and arguing it should not even exist for good advisers. The government has done a sneaky despicable act ever introducing this. Shame on them and I don’t care which government we are talking about.
Only Canberra could invent such inequitable, unfair and unethical policy.
The Labor Party have been truly awful in their handling of this.
Disgusting.
The liberals haven’t been any better.
“Something is rotten in the State of Denmark”. The ghost of Stephen Jones is an omen about the moral illegitimacy of our rulers.
Not forgetting the role of treasury in Dixon, the current saga of Guardian et al raises questions for which the cohort of affected advisers need answers and, at the very least, through an independent panel be privy to. Questions which anyone of us would ask of someone under our control. These should (for starters) be:
Accountability is paramount and ‘in house’ or related party panels are not acceptable.
Privacy and the usual escape clauses should not be sufficient to prevent an independent panel scrutinising the above.
here’s a thought.
ASIC Budget Reallocation: Deduct funds from ASIC’s annual budget—suggest $30-50 million—to reflect their role in regulatory lapses that allowed MIS failures under their watch. This could be drawn from enforcement penalties or operational savings, promoting better upfront scrutiny. Additionally, redirect all or a significant portion of ASIC’s enforcement proceeds (e.g., civil penalties like the $16.8 million fined to Allianz and AWP in February 2025 for misleading statements) solely to the CSLR. For context, ASIC collected $90.8 million in civil penalties in 2023-24 (per their annual report). This would provide a sustainable revenue stream from misconduct penalties, ensuring the $20m adviser cap can be maintained without increases. Such redirection could wake up ASIC to the consequences of regulatory shortcomings and incentivize stronger enforcement and oversight.