The superannuation industry has made clear it does not want to cross-subsidise bad behaviour in other sectors of the financial services industry such as financial planning by being forced to help fund a compensation scheme of last resort.
One of the largest superannuation industry representative bodies, the Association of Superannuation Funds of Australia (ASFA) has told the Government it believes the existing compensation arrangements applying to the superannuation industry are adequate and it sees no purpose in supporting a last resort arrangement.
It has made clear its opposition in circumstances where a Treasury position paper has pointed to the financial advice sector being the most heavily exposed to claim, citing the largest categories for unpaid Financial Ombudsman Service (FOS) determination as being disputes relating to the provision of financial product advice, disputes with operators of managed investment schemes and disputes with credit providers.
In a submission filed with the Treasury, ASFA said it considered the current regime in Part 23 of the Superannuation Industry (Supervision) Act 1993 to be “an appropriate and effective means of providing compensation for losses due to fraud or theft within the APRA-regulated superannuation sector”.
It went on to say that it saw “no benefit in displacing Part 23 in favour of a generic compensation scheme of last resort”.
The ASFA submission said the organisation did not “support any proposed industry-wide compensation scheme that has the potential to involve cross-subsidisation by the APRA-regulated superannuation sector of losses incurred within other sectors”.
“Whilst sympathetic to the plight of consumers who have been unable to obtain redress for past disputes, ASFA has significant reservations about the proposal to introduce a scheme for redress,” it said.
The ASFA submission then went on to outline some of its concerns, including the difficulties of adequately addressing issues of moral hazard, the inappropriateness of subjecting providers, particularly trustees of APRA-regulated superannuation funds, to unquantifiable and potentially open-ended liability in respect of past disputes, and the need for all stakeholders to have certainty, with clear timeframes and criteria applying to the resolution of financial system disputes, which mitigates against special rules for past disputes.
