Redesign the CSLR to spread the load says TAA | Australian Markets

Funding of the extra Compensation Scheme of Last Resort prices needs to be spread throughout as many sub-sectors as doable together with managed investments schemes (MIS) and with the Commonwealth pulling its weight, in accordance to The Advisers Association (TAA).

In a submission filed in response to Treasury’s session round the CSLR exceeding sub-sector levy caps, the TAA stated that whereas some submissions would search to allocate blame to particular sub-sectors or MISs, it’s the construction and funding of the CSLR which can be to blame.

It stated, on that foundation, the standing of the particular levy wants to be weighed in opposition to the need for legislative change.

“While the legislative framework does not contemplate the Commonwealth making a financial contribution to deal with an excess claims, fees and costs estimate it is worth noting that the primary contributor to this year’s excess relates to Dixon Advisory claims,” the submission stated.

“Consideration needs to be given to the Commonwealth excluding the Dixon legal responsibility and paying for these claims as they don’t seem to be aligned with the non–retrospective intention of the laws and relate predominately to vertically built-in financial product points, not advice.

“Stronger action should also be taken against Dixon’s parent company, its directors and advisers to reduce the losses,” the TAA stated.

Short of legislative change, the TAA submission argues that any particular levy imposed by the Assistant Treasurer and Minister for Financial Services, Daniel Mulino needed to be spread as broadly as doable.

“…spreading any special levy across multiple sub-sectors would still be the preferred option and is likely to be more repeatable in future as it helps the longer term sustainability of the financial services industry,” it stated.

The TAA submission argues from the outset that the there could be no need for a levy above the general cap to deal with sub-sector extra estimates if the CSLR was designed to be match for goal and was a real final resort scheme.

“A genuine last resort scheme would ensure that early action was taken to minimise losses, action would be taken against directors and advisers, the licensees and other companies involved to increase recoveries of revenue and fees related to their and their associated companies’ activities and claims made would only cover genuine retail clients capital losses rather than be assessed on a ‘but for’ basis,” it stated.

“Claims should be correctly and proportionally allocated to the sub-sector that is the root cause of the claim, which could include licensees, researchers, platforms, vertically integrated product providers and not just the advice sub-sector.”