FD Legal has approached the external dispute resolution service, urging a review and legislative amendment to expand its jurisdiction. This change would allow complaints against superannuation trustees who have enabled certain investment products on their platforms resulting in financial detriment to members. Currently, AFCA's scope permits complaints about superannuation trustees solely on decisions made directly to specific members.
The firm argues that involving trustees in these AFCA complaints could alleviate some pressure off the Compensation Scheme of Last Resort (CSLR). Trustees, being large and financially robust entities, are often capable of bearing accountability for customer losses, yet their conduct bypasses AFCA's current dispute resolution processes and CSLR’s intended scope.
As FD Legal represents those impacted by the $1.2 billion crisis, the firm underscores a deficiency in the CSLR's 'but for' determinations, criticized for negatively impacting consumers. While CSLR has recommended removing these determinations in Treasury consultations for the service’s sustainability, FD Legal insists that a more aggressive approach is necessary to recover funds from responsible entities.
The financial advisory sector is slated to contribute $67 million towards CSLR in FY26, with a proposed doubling in FY27. However, financial advisers are collectively mandated to cover only $20 million, necessitating a special levy by Minister for Financial Services Daniel Mulino to counter the anticipated deficit.
The submission has been formally presented to AFCA's Chief Ombudsman David Locke and Executive General Manager Jurisdiction Michelle Kumarich, alongside the financial services minister. ASIC has initiated investigations into Shield and First Guardian, focusing on the structural components of the products and the alleged misuse of member funds. Particular scrutiny surrounds the involvement of lead generators who employed aggressive sales tactics to funnel clients into these funds.
The regulator has intimated that advisory firms purportedly received financial incentives for these lead generation activities. With almost all licensees linked to the Shield and First Guardian collapses having their licenses revoked, it is anticipated that AFCA's determinations in favour of clients will be referred to the CSLR.
InterPrac Financial Planning remains the only licensee unaffected by revocations, owned by ASX-listed Sequoia Financial Group. Despite reports suggesting a voluntary administration strategy, Sequoia has refuted claims aimed at diverting liability payments.
