SPAA urges product provider compensation scheme
Product providers should be responsible for funding a last resort compensation scheme, according to the Self-Managed Super Fund Professionals' Association (SPAA).
SPAA chief executive Andrea Slattery pointed to the Trio Capital collapse and the fact it was the product providers who committed the fraud and that compensation was paid to Australian Prudential Regulation Authority-regulated fund members.
"A last resort compensation scheme operating at the product provider level would go a long way to spread the cost of compensation across the whole industry," she said.
Slattery's comments run counter to those of Financial Services Minister Bill Shorten, who specifically pointed to the self-managed superannuation fund (SMSF) industry having opted not to participate in the levy which funded the Trio compensation arrangements.
Looking at the fact that SMSF investors in Trio had not been compensated, Slattery denied the implication that SMSFs were prone to greater levels of theft and fraud.
"This is not the case, as APRA-regulated superannuation funds continue to have issues relating to identity fraud and activities that allow criminal elements illegal access to members' benefits," she said.
Slattery said the Parliamentary Joint Committee into the Trio collapse had recommended the Australian Taxation Office include consumer warnings on its website that SMSF trustees will not be compensated in the event of theft of fraud.
She said SPAA was concerned such warnings might give the impression SMSF investors are not protected or have access to alternative courses of action.
Slattery said SMSF investors who suffered loss as a result of misconduct or another individual could, in many situations, seek compensation via the Corporations Law or the Superannuation Legislation.
"We acknowledge there are shortcomings with these options and some may take some time to resolve," she said. "That is why SPAA is advocating the introduction of a last resort compensation scheme."
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
