Peter Burgess, chief executive of the SMSFA, told ifa that he and other heads of financial service sector associations were called to Sydney to meet with Mulino on Friday, 22 May, just hours before final submissions for the CSLR consultation closed.
“I made my views very clear that I felt that self-managed super funds have been unfairly targeted. There’s a tendency to blame SMSFs for some of the failings that we’ve seen in recent times. I wanted to correct that and reiterate that it wasn’t the SMSF that failed, it’s the product that the SMSF trustees were advised to invest in that failed.”
Burgess said he emphasised to the Assistant Treasurer that it was important not to conflate product failure with the failure of an SMSF, and in every case that’s been highlighted in recent years, it was not the self-managed super fund that was at fault.
“It was the product that they were recommended to invest in that failed, and they [trustees] have every reason to trust and interact on that advice that was provided to them,” Burgess said.
“It was provided by an adviser who is subject to a code of conduct, was licensed, and now investing in a product that’s regulated by ASIC, so they had every reason to follow that advice.”
He continued that it is important to understand this distinction and “wrong conclusions lead to wrong solutions”.
“That was one of the key messages I was delivering today,” Burgess said.
He added that although he was not surprised that the Assistant Treasurer called for a further meeting with financial services sector CEOs, he was surprised by the timing given that submissions were due later that day.
“We’ve been pretty scathing in our submission about the proposals in the consultation paper to do with self-managed super funds,” he said
“There were two options, including the opt-in opt-out option, and I did say [on Friday] that we were not a fan of either of those models. The purpose of the CSLR is for victims who have nowhere else to go.”
Burgess said the SMSFA also opposed the “but for” test.
He explained: “When they calculate compensation they don’t just look at the capital loss, but at the investment loss: essentially, where you would have been if it wasn’t for that advice.
“We don’t support the ‘but for’ calculation. If this compensation was payable by those who committed the misconduct, it would be a different story. But where we’ve got a scheme where innocent parties have been pulled on to fund the compensation, we don’t feel it’s appropriate to have that ‘but for’ calculation.”
