Levy MISs or risk CSLR collapse says ASDAA | Australian Markets

Treasury should recognise that Managed Investment Scheme (MIS) malpractice is the core driver of Compensation Scheme of Last Resort (CSLR) value blow-outs, in keeping with 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 instructed the Treasury extra levy session whereas really itemising the MIS failures contribution to the present extra

“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 stated.

“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 stated that if further funds are required past the $20 million sub-sector cap, they need to not come from financial advisers.

The $20m adviser cap should not be lifted, nor ought to advisers need to pay for the additional money. ASDAA proposes sourcing from three equitable locations:

• MIS Sector Contributions: Establish a new sub-sector levy on MIS REs, proportional to belongings beneath management or risk profiles. This ensures these chargeable for product failures contribute straight, addressing ethical hazard and aligning prices with fault. In addition to ongoing contributions, think about a phased catch-up levy on MIS REs for prior durations (e.g., since 2020) to handle historic failures equitably, recognising the challenges of retrospectivity however prioritising equity.
• ASIC Budget Reallocation: Deduct funds from ASIC’s annual finances – recommend $30-50 million – to mirror their position in regulatory lapses that allowed MIS failures beneath their watch. This might be drawn from enforcement penalties or operational financial savings, selling higher upfront scrutiny. Additionally, redirect all or a good portion of ASIC’s enforcement proceeds (e.g., civil penalties just like the $16.8 million fined to Allianz and AWP in February 2025 for deceptive statements, the $10.5 million penalty on Active Super in March 2025 for greenwashing claims, or the $4.995 million wonderful 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 supply a sustainable income stream from misconduct penalties, guaranteeing the $20m adviser cap could be maintained with out will increase. Such redirection may wake up ASIC to the implications of regulatory shortcomings and incentivise stronger enforcement and oversight.

• Government Funding: While direct authorities bail-outs usually are not contemplated beneath the present legislative framework (as confirmed in current reporting), this doesn’t preclude an equal contribution matching the advisory sector’s $20 million cap, doubtlessly by means of a one-off transitional modification or finances allocation of $160 million which is corresponding to the $16 billion allotted within the 2024-25 finances for HELP debt reduction (representing simply 1% of that quantity) which might absolutely fund the CSLR.

This recognises the CSLR’s public coverage position in client safety with out perpetually burdening industry, and addresses authorities shortcomings in historic 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 stated.