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The Financial Ombudsman Service (FOS) has welcomed a Government announcement that the outgoing convener of the Corporations and Markets Advisory Committee Richard St John will examine a statutory compensation scheme.
The Ombudsman for Investments, Life Insurance and Superannuation, Alison Maynard, said that recent corporate collapses have highlighted a significant gap in the consumer protection mechanisms afforded by Financial Services Regulation.
“The current requirement that Australian Financial Services [AFS] licensees hold professional indemnity [PI] insurance does not provide consumers with an assurance that they will be duly compensated,” she said.
The Government’s decision to support the Ripoll Inquiry’s recommendation to investigate a ‘last resort’ compensation fund is good news for consumers, she said, adding that a PI policy is not an adequate compensation mechanism.
“FOS has been actively researching and promoting a compensation scheme for two years now. We support an industry-based, industry-funded scheme that would offer ‘last resort’ compensation to retail clients of AFS licensees,” Maynard said.
Such a scheme should be available to all Australians who purchase a financial product or service, not just investors, she added.
“We have developed what we believe is a very good model of a compensation scheme based on our experience in resolving disputes and on the UK model of a compensation scheme,” she said.
