The Australian Financial Complaints Authority (AFCA) has published its Approach to determining compensation in complaints against Financial Advice Firms where the Responsible Entity (RE) of a Managed Investment Scheme (MIS) has become insolvent.
In developing this Approach, AFCA followed its new consultation methodology which was established as part of its response to Treasury’s Independent Review of AFCA.
The Approach document complements the existing AFCA Approach to calculating financial loss in financial advice complaints and was drafted in response to requests from stakeholders in the context of the passing of legislation for a Compensation Scheme of Last Resort (CSLR).
The purpose of the additional Approach document is to clarify for financial firms and complainants how AFCA approaches liability and loss when a financial advice firm is found to have breached its obligations to the complainant in circumstances where the RE of a MIS has become insolvent.
The document does not change or create new requirements, AFCA’s Lead Ombudsman, Investments and Advice, Shail Singh, noted.
“The Approach document aligns with legal principles, and with the obligations of financial advisers outlined in the Corporations Act,” Mr Singh said. “It was finalised after a consultation process that generated valuable feedback. We thank our stakeholders for their input.”
As well as guiding firms and complainants, the final Approach document will be used internally to aid consistency. You can find out more information here.
The new Approach document is among a suite of Approaches, on various topics, that AFCA has published and can be found here.