Rules make advisers the CSLR patsies
Clients impacted by the collapse of Managed Investment Schemes understand their route to be compensated for losses lies in making a complaint relating to financial advice rather than to the funds themselves, according to Financial Advice Association of Australia (FAAA).
The FAAA has told Treasury’s review of the MIS regulatory regime that “clients understand that there is little utility in making a complaint against the funds themselves or against any of the other stakeholders involved”.
It said, for this reason, the burden is inevitably being carried by financial advisers.
At the same time, the FAAA has told Treasury that not only Managed Investment Schemes (MISs) should be the subject of substantial regulatory reform in the wake of recent collapses but also companies used as investment vehicles, according to the Financial Advice Association of Australia.
Citing UGC’s Global Capital Property Fund, the FAAA has told Treasury’s review of the MIS regime that GCPF was a company, not an MIS.
“We therefore argue that in addition to reforms to provide greater protections for investors in MISs, there is also a need to consider situations where a company is used as the vehicle for investment,” it said.
The FAAA suggested that more detailed analysis of the failure of the Global Capital Property Fund would be beneficial to determine what changes are required for corporate structures.
The FAAA said it believed the Shield and First Guardian collapses had clearly demonstrated the need for a change to the regulation and governance of MISs and that it would be preferable for that the Treasury consultation took place in the full known of what has gone wrong in recent MIS failures.
“We would prefer to be undertaking this consultation with the full knowledge of what went wrong at Shield and First Guardian, along with a number of other recent collapses such as Australian Fiduciaries Limited and Remi Capital,” the FAAA said. “We do not know the nature of the compliance plans for these four MISs, the existence of compliance committees or the failings of the governance arrangements that were in place.”
“We recommend that the Government or ASIC publish details, at the appropriate time, on the governance failings when an MIS collapse of a material nature occurs.”
“The collapses of these funds, that appear to have been caused by a combination of negligence, fraud and mismanagement, will inevitably have a significant consequence for the financial advice profession, as virtually the only remaining way for the clients of these funds to be compensated, is for them to make a complaint about financial advice.
“These clients understand that there is little utility in making a complaint against the funds themselves or against any of the other stakeholders involved,” the FAAA said.
“Amongst the most significant factors impacting the ability of these clients to get justice is the fact that clients of MISs are prevented from making a complaint to AFCA about the management of a scheme or fund as a whole. AFCA Rule C1.5 is a major obstacle to these clients getting restitution from a fund, or at least having the ability to make a claim. It is essential that AFCA Rule C1.5 is removed to better allow clients to make complaints against MISs. Another important impediment is that unpaid determinations by MISs are excluded from the Compensation Scheme of Last Resort (CSLR).
“Unfortunately, many Australians have suffered greatly as a result of the collapse of these funds, both from a financial perspective and an emotional perspective. Australians would like to see clear consequences for those who have caused so much harm.”
Jonsey & ALP totally screwed Advisers leaving MIS out of CSLR.
Canberra collectively have blamed Advisers for 25 years for any and every part of the complex value chain that Advisers are only a small part of.
ADVISER PERSECUTION MUST STOP!
This lazy Government has hit small business owners because we are the easy target and can’t fight back.
Its the same reason that the average worker picks up the lions share of taxes, levies, duties, tolls, surcharges, and other charges with various labels that are taxation by stealth. This Government only knows how to harvest the low hanging fruit, and continue to let the larger organisations walk away scott-free. Why am I as a small FP business picking up the bill for a fraudulent company like Sheild that ran Managed Investment Schemes(MISs) and made huge profits. I shouldn’t be forced to pay any of this. The people involved should be completely stripped of their personal assets and their overseers should also be held accountable including ASIC. We as advisers are just an easy target. Its time we stood up and launched a joint class action against this theft!!!