Recently, the Government released a discussion paper on establishing an industry-funded compensation scheme of last resort (CSLR). The discussion paper is part of the government's response to the Hayne Royal Commission which recommended establishing a CSLR so that consumers and small businesses can receive compensation where a financial services provider is found to have engaged in misconduct and the provider is unable to pay.
The Government has committed to implementing the CSLR, to be operated by the Australian Financial Complaints Authority (AFCA), by no later than December 2020. Here, partner Elliott Stumm outlines some key features of the proposed CSLR.
The discussion paper concentrates on four main features of the CSLR being:
The discussion paper specifically excluded consultation on whether there should be a CSLR or whether any alternatives should be considered, including changes to professional indemnity insurance or the adequacy of financial resource obligations of AFS licensees.
It is expected that draft legislation to establish the CSLR will be available in mid-2020 if the CSLR is to be established by the end of the year.