South Australian senator Nick Xenophon has grilled CPA Australia’s bosses about the future of its loss-making advice arm, questioning whether it passes “the pub test” to insist on its continuation.
CPA Australia directors appeared before a Senate hearing in Canberra to address the modernisation of the Corporations Act. However, their support for refreshing the act was largely sidelined by a blistering line of questions from Mr Xenophon about the viability of CPA Australia Advice. Mr Xenophon labelled CPA Australia Advice a “financial disaster,” pointing to its losses of $7.2 million and revenue of $49,000 in 19 months, as well as its loan from CPA Australia of almost $20 million.
CPA Australia Advice is also a primary reason that the association could not secure its professional standards scheme before renewal next month, leaving members with a public practice certificate without the additional protection of limited liability cover.
Both president Jim Dickson and director Graeme Wade repeatedly rejected that the licensing arm is a failure.
In fact, Mr Wade – with a similar defence to that used by former chief executive Alex Malley – said the board was prepared for a struggle in the initial years of establishment.
“This is a long-term strategy, one that the board has deliberated over for many years. We had been hesitant to take that step because of the difficulty of establishing that business,” Mr Wade said. “We knew it was going to be a long, hard ball.”
When pushed on whether CPA Australia Advice would continue to operate, Mr Wade said it was up to the new board. As of 1 January 2018, any directors who operated in the era of Mr Malley will have departed the association.
Mr Wade said the business plan for the licensing arm outlined that it would be a five- or six-year project, a copy of which Mr Xenophon requires by this Friday.
The prudential regulator has released its latest corporate plan.
The bid was originally put forward in June.
ASIC has issued a permanent ban to the former financial adviser.
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