Impose compensation requirements on MISs say accountants
The major accounting groups are calling for better use of superannuation legislation to alleviate pressure on the Compensation Scheme of Last Resort (CSLR) where members of Australian Prudential Regulation Authority funds suffer loss because of fraud or theft.
The accounting groups have also called for tighter regulation of Managed Investment Schemes including imposing mechanisms for them to cover compensation payments and for both the Government and the Australian Securities and Investments Commission to pay their way.
The accounting groups have pointed to Part 24 of the Superannuation Industry (Supervision) Act which holds that a trustee of an APRA-regulated fund can apply to the Minister for financial assistance if the fund incurs a loss because of fraudulent conduct or theft.
“This option should always be considered where the losses are incurred by an APRA regulated fund,” the submission from CPA Australia, Chartered Accounts ANZ and the Institute of Public Accountants (IPA) said.
“We do not believe this option is always being utilised to fund compensation payments, prior to them reaching the CSLR. This section should always be investigated wherever possible.”
The accounting groups also called for a review of Professional Indemnity insurance describing it as “a must” to ensure “coverage is more robust and comprehensive including the requirement for run-off cover where the insured is no longer licensed, insolvent or been place in liquidation or administration”.
“It is also important that ASIC take an active part in monitoring licensee compliance with PI insurance requirements, particularly in targeting licensees who are at most risk, for example new licensees,” the submission said.
“If the review of the PI insurance market identifies deficiencies in that market which cannot be solved by government intervention or ASIC is unable to actively monitor AFSL PI insurance requirements then the government may have to consider capital adequacy requirements for AFSL holders,” it said.
“Such an outcome, we believe is unacceptable. Setting capital adequacy requirements may lead to AFSL holders, and financial advisers in general, ceasing to operate.”
The submission said the Government should participate in funding the CSLR particularly where sub-sector caps are exceeded.
The Joint Accounting Groups said they were also recommending change to the Australian Financial Complaints Authority’s (AFCA’s) “counterfactual (‘but for’ approach to the calculation of the compensation of clients that may result in higher compensation payments, because of compensation being awarded on hypothetical unrealised gains in the absence of actual capital losses”.
Hello Canberra, does anyone listen ?
Or are you all so completely corrupted that “let’s blame and charge advisers only is still the only option you take?”
If you are going to have this scheme, every accountant should also have to share the burden. I personally don’t think I should be imposed at all on small business owners at all. We have insurance to protect our clients, and the governess to take insurance against bad actors and not strip thousands of dollars each year just from small financial planning firms. The majority of players are generally medium to larger companies from what I can see. The government have got to stop stifling small business owners. Government cannot manage money properly, that’s clearly apparent so stop taking it when you do not do the right thing with it. It might be time that the government actually employ some honest advisers themselves to learn how to correctly manage the tax take because at the moment they are experts at wasting it.