Compensation Scheme of Last Resort – Senate Report
AFA News 10 March 2022. On 15 February 2022, the Senate Economics Legislation Committee released their report on the Government’s legislation to introduce a Compensation Scheme of Last Resort (CSLR). The AFA had appeared before the Committee in late January 2022, to argue for a broader scope for the scheme and for the establishment and administration costs of the scheme to be shared more broadly across the financial services industry, rather than being predominantly charged to financial advisers.
Whilst the main part of the Senate Committee report recommended that the legislation be implemented without amendment, the ALP Senators added a further statement to recommend that the scope of the scheme be expanded to include Managed Investment Schemes. This is an outcome that we would support.
The CSLR is scheduled to commence on 1 July 2022, however, it is the Government that will pick up the costs in the first year of operation. From the second year, the costs of the scheme, including a large share of the administration costs, and the cost of unpaid financial advice AFCA determinations, will be charged to financial advisers. Thus, getting the scheme design right is a critical outcome.
The legislation has not yet been passed by the House of Representatives, despite the release of the Senate Report. The Bill will also need to be passed in the Senate, and the Senate is only scheduled to sit for two more days before the election (for Budget week in late March), so it is very unlikely that the legislation will be finalised before the election. This would mean that it would be up to the new Government to finalise the legislation after the election.
For any questions or feedback on the CSLR, please email firstname.lastname@example.org
Issued 10.03.2022. AFA Policy & Education Update