The funding levy for the compensation scheme of last resort (CSLR) must be sustainable for small to medium-sized businesses to survive and declining incomes from the COVID-19 pandemic should delay the implementation timeframe, according to Chartered Accountants Australia and New Zealand (CA ANZ).
It its submission on the CSLR, CA ANZ raised the following concerns:
- The level of levy requested from advisers needs to be sustainable, particularly for smaller and medium sized businesses that had been overwhelmed with ever-increasing regulatory costs;
- The issue of declining income costs due to COVID-19 and that the implementation timeframes should take this into account;
- The quantum of the proposed CSLR is quite high;
- Ensuring the CSLR was not overwhelmed or overburdened with high and unnecessary administrative costs, including the proposed reimbursement of the Australian Financial Complaints Authority (AFCA) fees;
- The CSLR should be a scheme of last resort for clients who could be remediated in no other way;
- Inclusion of product providers;
- Incorporating professional indemnity (PI) Insurance reform to ensure the proposed CSLR was workable with the PI insurance system; and
- The possibility of the scheme becoming a potential moral hazard needs to be addressed as this could be a consequence of the currently proposed CSLR.
On the last point, an example cited was licensees who may otherwise had been captured by the scheme may start to reduce their number of advisers to ensure they were no longer captured by the scheme.
The inclusionof product advisers had been previously called out in a joint statement as the current proposal placed the sole burden on the advice component of the industry.
Changes to the PI system would allow for the possibility of insurance covering claims either in full or in part and some of the regulatory expenses.
Bronny Speed, CA ANZ financial advice leader, said: “CA ANZ believes the funding of the proposed CSLR will add additional red tape with significant associated additional costs and, as such, we would like to see amendments to this bill”.