Major super funds join chorus against AFCA’s ‘but for’
The major superannuation funds have thrown their weight behind financial adviser pleas for the Government to scrap the Australian Financial Complaints Authority’s ‘but for’ test for losses suffered by consumers.
In strong submission filed as part of Treasury’s review of the Compensation Scheme of Last Resort (CSLR) and the role of Professional Indemnity Insurance (PII), the Association of Superannuation Funds of Australia also called on the Government to fund current and ongoing CSLR shortfalls.
It said compensation should be “limited to actual losses, rather than applying the current ‘but for’ test that evaluates hypothetical gains in addition to actual losses suffered by consumers.
As well, ASFA said the schemes administration and operational costs should be reduced, with a detailed review of the current operating model and consideration of options to increase the Scheme’s efficiency.
“The Government should contribute to funding the current shortfall and pursue wrong-doers – it would be appropriate for the Government to make a financial contribution to the 2025-26 special levy to assist in addressing the compensation shortfall, as well as contribution in the years ahead in case a shortfall arises” it said.
“This should include the attribution of ASIC enforcement penalties (on impacted sectors) to fund the levy and an expectation that ASIC will prioritise compensation orders over civil penalties in instances of consumer loss. We would also encourage the resourcing of a discrete agency to focus on loss recovery via the exhaustion of all possible avenues prior to scheme utilisation.”
The ASFA submission also argues that there should be more complete pursuit of those responsible for misconduct.
“The current consultation on enhancing professional indemnity insurance (PII) is welcome in this context, given issues regarding pursuit of claims for entities in administration/liquidation. The review should also consider how the regulatory framework can better prevent those responsible from undertaking and perpetuating misconduct,” it said.
The submission suggests this could include consideration of stronger monitoring and preventions for phoenixing, strengthening penalties against individual perpetrators, and providing the CSLR with greater powers of subrogation to better enable recovery for entities in liquidation.
“These measures would all assist toward ensuring the Scheme genuinely operates as a last resort,” it said.
It’s not often Advisers will agree with ASFA but they list a lot of good points.
The obvious omission is the entire MIS sector to fund their own frauds & failures.
MIS to be regulated properly and have independent RE.
The current AFCA model encourages consumers to engage advisers to put them into high risk investments, safe in the knowledge AFCA’s “but for” approach will guarantee them index fund returns if the high risk option doesn’t work out. If the high risk pays off, the consumer pockets the gains.
This isn’t consumer protection, it is a regulatory scam to exploit and persecute the innocent financial advisers who end up paying for it.
Yes the Government should make a contribution, but Industry Funds that hold 31.5% of the Industry in its hands ($1,400,000,000,000 in funds) should be contributing some of the revenue they clip off each of the 11,000,000 retirees.
31.1% of the CSLR and part of the PI Insurance costs would be a good starting point. It can’t just be all revenue for doing very little, and no accountability!!!