The ability of SMSF members to bring a compensation claim against a financial adviser should be limited to a single claim brought by the fund, with the Financial Advice Association Australia (FAAA) calling on the government to make this part of a raft of changes to the Compensation Scheme of Last Resort (CSLR).
FAAA chief executive Sarah Abood said the representative body had spoken with Financial Services Minister Stephen Jones about its concerns with the CLSR and was focused on changes that could be made by him and did not require an act of parliament.
Speaking during a recent member briefing, Abood said these changes were concentrated on reducing the funding costs of the scheme, which were borne by the advice sector, and noted a gap regarding complaints from SMSF members.
“There are some administrative matters that need to be settled and one example is that in an SMSF there could be six members,” she said.
“We want it clarified that the $150,000 compensation cap for payment from the CSLR applies to the SMSF and not to every individual member of that fund.”
She also called for a limit on compensation where a complainant had already received it from another source, such as a class action.
“This is very relevant for the Dixon case because we have a class action that was recently concluded and many of the members who have made claims via the Australian Financial Complaints Authority, and then potentially via the CSLR, will be receiving money from that class action,” she said.
“It’s not appropriate that is in addition to what they would receive from the CSLR, which is supposed to be a scheme of last resort.”
She also noted Jones still had to decide on what would happen if the CSLR levy for the financial advice sector exceeded the $20 million cap for the next financial year due to the large amount of Dixon Advisory-related complaints.
“We are arguing strongly they shouldn’t be attributed to our sector. The Minister has the power to decide what happens to those amounts and we have suggested they could be evenly split across all of the sub-sectors that the Australian Securities and Investments Commission regulates,” she said.
“The urgency now is to ensure that it’s not financial advisers that will be paying amounts above $20 million and that’s a decision the Minister can make that does not need to go to parliament.”
