Advisers should make Compensation Scheme of Last Resort levy payments under protest, according to legal advice provided to the Principal’s Community.
Despite suggestions in quarters of the advice sector to protest the levy by not paying at all, legal advice provided to the community by law firm K&L Gates partner Jim Bulling suggests making the payment accompanied by a “under protest and without prejudice” notation. This would ensure that any funding of levies does not compromise financial advice firms’ rights in relation to any legal action they may later choose to take.
The community was concerned about the “arbitrary allocation of liability” to the advice profession, and the misconduct they are being forced to pay for through the levy – specifically, misconduct by Dixon Advisory.
It wrote to Minister for Financial Services Stephen Jones on 17 July with a “Statement of Facts” challenging the validity of the levies, but has not received a response from the minister.
“[For] whatever reason he chose not to, he hasn’t responded,” Principals’ Community managing director Kon Costas tells Professional Planner.
“We know we have to make all of our community members aware of the Statements of Facts in greater detail so we can educate them around what are the some of the themes and issues that are out there.”
CSLR levies were issued last week, on 6 August, and are due to be paid by licensees by 18 September.
“From our perspective our communities all signed on to use this protest as something that they’ve got in their armoury,” Costas says.
Costas says they want to offer the payment under process letter to licensees and other industry leaders if they want to utilise it as part of a protest.
“This is not about providing legal advice, here’s a document that you can use for your own protest,” he says.
Costas says he’s supportive of the CSLR philosophically and believes it “has a place”, but requiring advisers to pay for misconduct by Dixon has “blown up” the scheme.
“There’s real grounds here for being able to deal with supporting the profession and the government really needs to listen to why we’re bringing this to everyone’s attention,” Costas says.
“Things like the Dixon case is a known matter. It’s been known from the start. It’s a black swan event, but we’re putting it front of the CSLR to the detriment of the CSLR with the government going back and not covering the costs associated with this known matter and having no response by the minister to this Statements of Facts.”
The CSLR levies have so far been broken into three periods: a pre-CSLR levy, which is $241 million and covered by the 10 largest financial institutions; the FY24 levy which was meant to be paid by the government, which controversially only paid for three months; and the FY25 levy of about $18.5 million to be paid for exclusively by the advice profession. The total FY25 levy equates to $1186 per adviser. Costas notes the FY26 levy using the actuarial numbers could well be five times the cost of the FY25 levy.
A backlog of Dixon Advisory claims in the system won’t be cleared before the advice sector is due to take over funding the scheme, a situation which has drawn the ire of professionals who remain in the industry and are paying for the misconduct of an unrelated entity and whose parent company is still in operation.
The scheme was designed as a “last resort” to compensate victims of financial misconduct if a company failed to pay a determination by the Australian Financial Complaints Authority.
Principals Community director of corporate governance Brian Pollock says the industry is “not best placed to fund this backlog” as detailed in the Government’s own briefing papers from 2023.
“That’s why the top 10 [institutions] were meant to fund it, and the government is meant to pick it up – because they were best placed,” he says.
The community briefed the opposition Minister for Financial Services Luke Howarth on its position earlier this week.
At an event in Sydney on the morning the profession received its levy notices, Howarth announced the Coalition would look at returning the sub-sector cap to $10 million, which is what it had proposed when in government.
Anyone who even has a cursory look at Government action and in-action, will clearly see that State and Federal Governments ALWAYS go into siege mentality when confronted with blindingly obvious errors made by the Governments when acting or reacting to events.
They, just like everybody else it seems, use silence, false appeasement via fake mediation / consultation and Legal blockers to stymie any negative feedback, or requests for proper improvements to be made to illogical arguments or frameworks dreamed up by Institutionalised robots within the Government Public service sector, aided and abetted by large Lobby groups who make donations and suggestions to better only themselves, usually at the expense of everyone else.
One example that affected members of my family, where the Airforce base up near Newcastle had contaminated ground water, by using highly toxic fire retardant that caused vast tracts of land owned and lived on by Australians who worked hard, paid their taxes and were supposed to be protected by the Federal Government, who denied that there was any problems, even though all the land was declared a RED ZONE, making people’s homes worthless.
The Government even had the temerity to say, “There is nothing to worry about, though do not use the water for human or animal drinking, watering gardens, or crop spraying.
When residents who could no longer sell their homes, asked for help, the Government brought in their Lawyers, instead of doing the right thing and helping these innocent home owners.
So what these poor people had to do, was take out a Class action against the Government, which they were successful in beating the Government on their indefensible and abhorrent action, though as is always the case, the Lawyers made Multi, Multi – Millions of dollars and the home owners got a fraction of what they should have been entitled to after their own Government effectively destroyed their lives.
Has the Government had an Ephinay after this and countless other acts of absolute dereliction of duty or care for it’s own citizens?
Absolutely not, as they still today, fall back on their own code of silence and avoidance of responsibility by continuing to use Lawyers to cover up, hide and deny their wrongdoings.
When the big lobby trucking groups got in the ear of the Government and made suggestions of making it virtually impossible for small transportation Businesses to continue operating, these same small Transportation entities spent years talking to Government, who then promptly ignored their valid arguments and sided with the big boys, at which point the little guys did what they should have done right from the beginning when they were being ignored and blockaded Canberra’s roads so nothing went in or out.
Well guess what, once the experts in Canberra realised that they had pushed too far and now it has become very obvious and an embarrassment, where the world could see that valid arguments are ignored and in desperation, honest, hard working people were forced to take REAL action, then and only then did the Government come to the table and progress was made.
Getting legal advice that says pay this outrageous impost on innocent Advisers and Licensees for the abject failure of the Government Agencies who should have been on the front foot from the beginning, then note “without predjudice,” is only playing into the Lawyers game of high cost litigation where only the Lawyers win again and again and again.
Nothing changes and we are all still being screwed to the wall, unless as, just like the small transport Companies did, you IGNORE vested interest legal advice and as a collective, refuse to pay the levy until a full investigation has been conducted and all guilty parties are punished, including inept Public servants who should lose their jobs, including the Lawyers who knowingly twist the truth.
That is the ONLY way the Government will sit up and take notice and if they try strong arm tactics, then do what my family were forced to do and sue the Government, with the added proviso that guilty parties will be removed from all Government jobs and even let them know they will be held personally accountable if proven they acted in a manner to deliberately harm innocent parties.
THEN AND ONLY THEN, will we start making progress.
The alternative is more and more Legal wrangling and a continual decline in all Australians abilities to get on and make a decent living without what has become a nightmare of self serving Government and Legal interference, with little merit, or end result.