Planners face funding mandatory indemnity scheme
Financial planners would be required to fund a professional indemnity compensation scheme if a proposal to Federal Treasury, supported by the Financial Industry Complaints Service (FICS), becomes law.
Consumer advocacy group Choice, as well as litigation funding company IMF and legal firm Slater and Gordon are among the organisations championing a compensation scheme.
The proposals were made in submissions to Treasury and at an industry round table about its planned introduction of a mandatory professional indemnity (PI) insurance framework into the financial planning industry.
The proposal is contained in draft Corporations Act Regulation 7.6.02AAA, which requires all financial services licensees to have “adequate” PI in place.
The round table was reportedly called after verbal reassurances by Treasury appeared to fail to convince the industry to accept that the draft wording would not potentially place impossibly onerous PI cover requirements on smaller, independently-owned licensees.
FICS chief executive Alison Maynard told Money Management that FICS “supports” a PI insurance compensation scheme.
She said FICS did not have a “definite view” on funding, but there “would be some level of government regulation or involvement if there was to be such a scheme”.
“It’s hard to see how you can run such a scheme without some involvement from government to ensure some level of compulsion” from financial services licensees.
Nick Coates, Choice finance spokesman, said the organisation was “very sympathetic to some sort of last resort compensation fund”.
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