Govt bail-out never an option with CSLR | Australian Markets

ANALYSIS

The degree to which the laws underpinning the Compensation Scheme of Last Resort (CSLR) funding preparations has completely focused the slim cohort of financial advisers, credit intermediaries, and securities sellers has been laid naked by the Treasury.

The Treasury session paper dealing with exceeding the financial advice sub-sector levy cap additionally makes clear that those that designed the laws made sure that neither the Government nor different financial companies sectors could be requested to pay a price.

Indeed, the Treasury session paper makes clear that, underneath the phrases of the laws, there can not and won’t be a authorities bail-out.

It states, fairly bluntly, “the legislative framework does not contemplate the Commonwealth’s making a financial contribution to deal with an excess claims, fees and costs estimate” with the option merely not being out there.

“The legislation provides for the Commonwealth to pay the CSLR’s costs for the first levy period (which ran from 2 April to 30 June 2024). But beyond that point, section 1069P sets out the funding sources of the CSLR operator (that is, the amounts ASIC has collected under the CSLR Levy (Collection) Act),” it stated.

What is attention-grabbing concerning the Treasury session paper is that it really does canvass the option of spreading a particular levy for the complete quantity of the surplus throughout “multiple retail-facing sub-sectors” after which gives illustrative estimates of what it will price sectors reminiscent of Managed Discretionary Account suppliers, superannuation funds and accountable entities.

Those estimates affirm what financial advisers will already know – that the price of the levy will inevitably be commensurately decrease if the burden is equally unfold throughout retail-facing sectors.

The session paper states that whereas the surplus prices for the present financial 12 months will likely be dealt with within the prevailing legislative framework, “Treasury invites stakeholder views on whether alternative options exist that could be considered by Government”.

“For example, if options to spread the excess costs across ‘retail-facing sub-sectors’ are appropriate, then an appropriate metric for apportioning a special levy may be the number of retail clients served by each sub-sector. This would ensure sub-sectors with more exposure to retail clients bear more of the cost,” it stated.

“Entities do not currently report to ASIC on the number of retail clients they have (or had during a reporting year) and no reliable alternative estimates of these numbers exists. However, if entities in retail-facing sub-sectors were required to report to ASIC the number of retail clients with whom they had dealings each financial year, this could be used to apportion a special levy.”