The Financial Advice Association Australia has put its support behind new rules enabling the Australian Financial Complaints Authority to publicise the failure of financial firms to comply with AFCA determinations.
AFCA released its “2025 Rules Consultation” which included proposing a new rule enabling AFCA to publicise the names of financial firms who fail to comply with a determination.
AFCA currently includes the names of financial firms in determinations it issues and publishes on its website, but the rules don’t allow publishing or publicly naming of a financial firm that has not complied with a determination.
“In the interests of transparency, and fairness to other member firms who fund the AFCA EDR [external dispute resolution] scheme, AFCA seeks to publish the details of financial firms who fail to comply with their membership obligations by failing to comply with an AFCA determination,” the AFCA submission said.
This proposal was backed by the FAAA in a submission co-signed by policy general manager Phil Anderson, as well as representatives from the SMSF Association, Chartered Accountants ANZ, CPA Australia and the Institute of Public Accountants.
“We strongly support the addition on a new rule to enable AFCA to publicise the failure of financial firms to comply with AFCA determinations,” the FAAA submission said.
“It is concerning to see that 64 financial firms have failed or refused on at least one occasion to give effect to a determination, in the year to 31 March 2025.”
The submission called for the reporting of the total number of unpaid determinations and gross amount payable for both the current year, and on a cumulative basis across all years, at the firm level.
It also requested this information to be updated on a quarterly, if not monthly, basis and for AFCA to issue media releases on specific firms once the number of unpaid determinations reaches a certain threshold, for example 25 or 50.
“This would be an important message for the clients or former clients of this financial firm,” the submission said.
“The publication of information on unpaid determinations will help the financial advice sector to understand where these problems are arising and be better able to project the likely impact on future CSLR levies. This would be a form of early warning system for emerging issues.”
The failure of payment for AFCA determinations – and the impact that has on the CSLR – has been one of the major advocacy priorities of the FAAA.
The submission noted financial advisers are covering more than 75 per cent of the cost to fund the CSLR.
The three industry funded levies have so far come as $18.5 million for FY25, $78 million in FY26 which led to the government announcing a review into the funding of the scheme, and a projected $123 million in FY27.
Much of the blowout to the costs has been due to AFCA’s controversial “but for” determinations where a capital loss hasn’t been suffered but the client was found to be worse off due to the advice given.
Former Minister for Financial Services Stephen Jones told the Professional Planner Advice Policy Summit earlier this year this mechanism in the process would likely be amended.
The submission added the cost of the CSLR is a “major threat” to the financial advice sector.
“We strongly support greater publicity with respect to those who fail to pay, enabling other participants in the financial services industry to see those entities that have contributed to the cost of the CSLR,” the submission said.
The submission also criticised the limited detail given in ASIC releases about the cancellations of AFSLs due to the payment of a CSLR claim.
“Since the CSLR was established in April 2024, ASIC have, on a number of occasions, announced the cancellation of AFSLs as a result of the payment of a claim with respect to that AFSL by the CSLR,” the submission said.
“Very little additional detail is made available, which is a suboptimal outcome. We believe that greater awareness of these unpaid determinations is both important and a strong disincentive to those responsible for businesses that put clients in this position.”
In a separate submission, the Stockbrokers and Investment Advisers Association also supported the public reporting of firms who fail to comply with an AFCA determination.
“It is vital for our members that there is full transparency of the status and amount of unpaid AFCA determinations as well as the identity of the financial firm in default,” the SIAA submission said.
“SIAA recommends that AFCA provide real time reporting of this information as well as monthly updates and a progressive count by firm.”
