AFCA has appointed a senior ombudsman specifically to handle Compensation Scheme of Last Resort (CSLR) complaints.
Ian Donald is a senior ombudsman in AFCA’s investment and advice team and will now specialise in CSLR complaints within the team.
He has worked at the organisation since 2009, joining under its first iteration as the Financial Ombudsman Service (FOS), and previously worked in the enforcement directorate team at ASIC as an in-house lawyer.
Tim Goss, AFCA’s business lead for CSLR, said: “[Investment and advice] really is the majority space where we are seeing in-scope complaints relating to insolvent financial firms, so Ian’s presence within the space to assist the team is an important step forward.
“We are eager to deal with these matters as quickly as we practically can.”
The organisation previously stated it has increased the workforce on the investment and advice team in order to deal with the backlog of complaints, many of which relate to Dixon Advisory and Superannuation Services (DASS).
Almost 2,000 complaints have been received by AFCA regarding DASS, and further complaints are possible as Dixon is required to maintain AFCA membership until at least 8 April 2024. This is the largest volume of complaints received regarding a single firm in AFCA’s five years of operation.
When it comes to dividing the roles of the CSLR – which is a standalone operator – and AFCA, Goss said AFCA’s job will be to review paused complaints to determine if they are in scope for CSLR, take appropriate steps to seek payment, and provide notice to the consumer to raise the claim with the CSLR. It will then be up to the CSLR to pay eligible claimants.
AFCA stressed that it is up to the consumer if they wish to raise a claim with the CSLR, not AFCA.
As to how complaints are determined, AFCA said it expects the outcome will be easier to determine as the process goes on, having already issued its first example case study on the matter.
Shail Singh, lead ombudsman for investments and advice, said: “We will be able to derive efficiencies, but there are a number of variations on the theme. Some have a very larger portfolio and only a small is invested in Dixon, for example. The nature of the allegations can be different depending on the particular complaint involved, there are individual circumstances that need to be considered.
“Once we get through the first batch of them, which is in the order of 100 complaints, then there will be efficiencies derived for the remainder of them and that will happen over the next year or two.”
CSLR should be broken down into 2 sub sectors, one for product manufacturers and one for financial advisers.
Product manufacturers account for 98% of the unpaid claims and they must contribute 98% of the pool to fund CSLR.
We made the decision 30 years ago to cease promoting unlisted managed funds and none of our clients hold any managed investments that are NOT listed on the ASX.
We strongly believe in Managed Funds; however we see that unlisted managed funds fall over when markets suffer a market correction and outcome is unacceptable.
The $40 billion worth of frozen funds are one of the reasons for our decision and ASIC must take its share of the responsibility for these losses.
ASIC should be compelled to fund 50% of the losses caused by product failure as part of their share for the lack of responsibility for failing to properly regulate their distribution.
ASIC must ensure that all products meet a code of practice that ensures that they are unlikely to fail and further they can meet redemptions in difficult markets.
Only ASIC has this power, and they should stop running for cover every time a product fails.
William Mills Price Financial Intelligence