Levy MISs or risk CSLR collapse says ASDAA

Treasury must recognise that Managed Investment Scheme (MIS) malpractice is the core driver of Compensation Scheme of Last Resort (CSLR) cost blow-outs, according to the Association of Securities and Derivatives Advisers of Australia (ASDAA).

“By not levying MIS operators, the CSLR scheme perpetuates inequity and risks its own collapse,” the ASDAA has told the Treasury excess levy consultation while actually itemising the MIS failures contribution to the current excess

“These entities caused the problems and should pay for them from the outset through direct contributions to prevent future failures and ensure fair burden-sharing,” the submission said.

“While ASDAA supports accountability, the current imbalance positions advisers as the disproportionate backstop for failures beyond our control. The adviser network cannot continue to be the scapegoat here – the MIS sector must start paying its share.”

The ASDAA submission said that if additional funds are required beyond the $20 million sub-sector cap, they should not come from financial advisers.

The $20m adviser cap must not be lifted, nor should advisers have to pay for the extra money. ASDAA proposes sourcing from three equitable places:

• MIS Sector Contributions: Establish a new sub-sector levy on MIS REs, proportional to assets under management or risk profiles. This ensures those responsible for product failures contribute directly, addressing moral hazard and aligning costs with fault. In addition to ongoing contributions, consider a phased catch-up levy on MIS REs for prior periods (e.g., since 2020) to address historical failures equitably, recognising the challenges of retrospectivity but prioritising fairness.
• 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, the $10.5 million penalty on Active Super in March 2025 for greenwashing claims, or the $4.995 million fine on Macquarie Bank in August 2024 for market gatekeeper failures) 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 incentivise stronger enforcement and oversight.

• Government Funding: While direct government bail-outs are not contemplated under the current legislative framework (as confirmed in recent reporting), this does not preclude an equal contribution matching the advisory sector’s $20 million cap, potentially through a one-off transitional amendment or budget allocation of $160 million which is comparable to the $16 billion allocated in the 2024-25 budget for HELP debt relief (representing just 1% of that amount) which would fully fund the CSLR.

This recognises the CSLR’s public policy role in consumer protection without perpetually burdening industry, and addresses government shortcomings in historical regulation.

“After these measures, no further special levies should be imposed. The CSLR must operate within real finite financial constraints, with improved forecasting and AFCA claim scrutiny to prevent future overruns,” the submission said.