Anderson says CSLR may be implemented as legislated, but not as promised

On Tuesday, Financial Services Minister Stephen Jones told ifa that the “CSLR is being implemented as legislated last year with bipartisan support after almost a decade of consultation and discussion”.

On LinkedIn on Thursday night, FAAA general manager for policy, advocacy and standards, Phil Anderson, had a lot to say in response to the minister’s comments to ifa. Here it is in its entirety:

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The government are not delivering the CSLR as promised. The key commitments that were not met (before we discuss any of the other flaws) are that it would be prospective and the government would pick up the first 12 months of operating costs and claims. The specific meaning of being prospective, as per the 2017 Ramsay review, is that the industry would only pay for matters that arise after the scheme has been established. Dixon Advisory went into administration in January 2022 and the administrator issued a report in November 2022 setting out that 4,606 clients had lost $368 million. That was all known three months before the legislation was introduced in March 2023, seven months before the legislation was passed (June 2023) and 16 months before the scheme commenced (April 2024). The retrospective application of the CSLR is indisputable.

The fact that the government is only picking up the cost of 1 Dixon Advisory case demonstrates how this three-month period has allowed them to cheapskate on this. It is literally not possible for AFCA to process that many complaints that could work their way through the system after the start in April 2024 and before the government’s deadline of 30 June 2024. This was a well-considered plan to limit the cost to the government.

Now in terms of disclosure, the Parliament had no idea what they were voting for, despite the fact that Dixon Advisory was a known debacle well before they voted. There were already 1,638 Dixon complaints with AFCA by 7 September 2022, which was six months before the legislation was tabled and nearly 10 months before it was passed. The explanatory memorandum to the March 2023 bill did not discuss Dixon Advisory and included the following statement along with a table for financial impact that included a -2.7m in 2022/23, +0.5m in 2023/24, -0.1m in 2024/25 and -1.6m in 2025/26:

“The estimated financial costs of the CSLR are indicative and dependent on a number of key factors including the scheme commencement date and AFCA complaint consideration processes.”

That is meaningless. What makes it even worse is that there was no regulation impact statement, with the weakest excuse that the royal commission final report was akin to a RIS, despite the fact that it was issued more than four years earlier and two years before Dixon went into administration:

“The Financial Services Royal Commission final report has been certified as being informed by a process and analysis equivalent to an impact analysis for the purposes of the government decision to implement this reform.”

Just imagine how ASIC and AFCA would respond if advisers gave clients statements of advice that were so limited in facts, were knowingly misleading and failed to provide any cost estimates or comparisons.

The government might say that they are implementing this as legislated; however this is not being done as promised and it was done on the basis of inadequate and misleading information.