The broader financial services industry has welcomed Assistant Treasurer Daniel Mulino’s announcement that payments made to consumers under the Compensation Scheme of Last Resort (CSLR) will be limited to actual investment losses rather than hypothetical ones from 1 July next year.
The Stockbrokers and Investment Advisers Association (SIAA) is particularly pleased about the change, stating the move puts the CSLR on a “firmer and fairer” footing.
“We have long argued that the CSLR was never intended to underwrite investment risk or pay complainants’ hypothetical ‘but for’ gains. But the changes limiting compensation to actual losses will not come into effect until 1 July 2027, which means industry will continue to be subject to these ballooning costs for some time,” SIAA chief executive Maria Lykouras noted.
The Financial Advice Association Australia (FAAA) echoed this sentiment.
“Basing CSLR compensation on actual losses is a decision we’ve pushed for consistently, so we are pleased the Minister has heeded this,” FAAA chief executive Sarah Abood said.
However, the FAAA is still concerned by the high levies the CSLR has placed on financial advisers and confirmed it will continue to advocate and work with Mulino to ensure the financial advice industry does not pay more than $20 million in relation to this impost.
The SMSF Association reiterated its objection to having the sector pay a CSLR levy, but did not oppose the idea of spreading the cost of the measure across all parts of the financial services industry.
The industry body also repeated its calls for the CSLR to be funded from revenue other government agencies have already raised.
“ASIC (Australian Securities and Investments Commission) has secured a record $830 million in civil penalties and we believe reform should be considered to redirect a portion of these funds back to the CSLR, just as reform will be introduced to levy the SMSF sector if a special CSLR levy is required in the future,” SMSF Association chief executive Peter Burgess said.
