The government has put the Compensation Scheme of Last Resort legislation on hold, potentially considering further amendments.
The scheme is designed to compensate consumers as a last resort when a financial judgement from the AFCA is unable to be paid by the defendant firm in question. The main sticking point in the legislation was whether managed investment schemes (MISs) should be included.
Financial Planning Association head of policy Ben Marshan tells Professional Planner the move to put the legislation on hold is a positive result for the industry.
“We think the delay is good – it gives the government time to get the compensation scheme right if they’re going to go ahead with it,” Marshan says.
“It’s no point having a scheme that doesn’t actually compensate most consumers who lose their money.”
The CSLR was one component of the bill that also dealt with payday lending and the financial accountability regime.
“We’ve obviously advocated that it should be expanded to financial products as well, particularly Managed Investment Schemes,” Marshan says.
“The government – through our advocacy and others – might not have the numbers in the Senate to pass it in its current form.”
Tug of war
Labor had pushed for MISs to be included in the CSLR bill when they were in opposition but stated they would pass the bill regardless.
Ultimately, the bill lapsed in Parliament after the election was called whichthen financial services minister Jane Hume attributed to a lack of support from Labor.
“Labor’s position on this bill has been unclear for some time,” Hume said after the bill had lapsed.
“You did say you would support the bill, but you didn’t say it would go through unamended.”
Marshan says it’s “rather perplexing” Labor put up the same bill when both parties could have passed it before the election.
“The former government felt they didn’t have the numbers so they didn’t take it through the Senate,” Marshan says. “Now this government doesn’t feel like it has the numbers.”
While Labor might have excluded MISs from the re-introduced legislation, the government announced a budgetary allocation for a review into MISs during the October budget.
Ganging up
The FPA had pushed for MISs during hearings on the scheme, pre-October budget submissions and before the election.
The Financial Services Council, whose membership consists of the manufacturers of investment products, has been the main opponent to the addition of MISs into the CSLR.
It was opposition that held its ground despite 15 consumer and industry bodies that advocated for MISs to be included.
Other than coverage for who will fund the scheme, another sticking point which was raised by Senator Andrew Bragg is the “god-like powers” the minister will have to impose further levies on the industry to cover any funding shortfalls.
