First Federal Budget in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
2019-20 Federal Budget
Last week saw the first Federal Budget in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Federal Government announced they will provide $606.7 million over five years in response to the Royal Commission:
Use of Funding Amount
$2.6 million - Designing and implementing an industry-funded compensation scheme of last resort (CSLR) for consumers and small businesses.
$2.8 million - Providing the Australian Financial Complaints Authority (AFCA) with additional funding to help establish a historical redress scheme to consider eligible financial complaints dating back to 1 January 2008.
$30.7 million - Paying compensation owed to consumers and small businesses from legacy unpaid external dispute resolution determinations.
$404.8 million - Resourcing the Australian Securities and Investments Commission (ASIC) to implement it new enforcement strategy and expand its capabilities and roles in accordance with the recommendations of the Royal Commission.
$145.0 million - Resourcing the Australian Prudential Regulation Authority (APRA) to strengthen its supervisory and enforcement activities which will support its response to key areas of concern raised by the Royal Commission, including with respect to governance, culture and remuneration.
$7.7 million - Establishing an independent financial regulator oversight authority, to assess and report on the effectiveness of ASIC and APRA in discharging their functions and meeting their statutory objectives.
$1.0 million - Undertaking a capability review of APRA, which will examine its effectiveness and efficiency in delivering its statutory mandate, as well as its capability to respond to the Royal Commission.
$11.2 million - Establishing a Financial Services Reform Implementation Taskforce within the Treasury to implement the government’s response to the Royal Commission, and co-ordinate reform efforts with APRA, ASIC and other agencies through an implementation steering committee.
$0.9 million - Providing the Office of Parliamentary Counsel with additional funding for the volume of the legislative drafting that will be required to implement the government’s response to the Royal Commission.
The SR Group represents a group of 116 individuals and entities, each of whom was a client of disgraced Sydney based financial adviser. The financial adviser advised each of their clients to invest in the a managed investment scheme, without regard to each individual’s needs, wants or desired investment outcomes. The financial adviser did so without disclosing their close relationship with the managed investment scheme or the exorbitant commissions they received for promoting the scheme.
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On Monday 4 February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry release its final report containing 76 Recommendations. At 4:20pm, Treasurer Josh Frydenberg held a press conference announcing that the Government had agreed to adopt 75 of the 76 recommendations made by the royal commission, opting against fully implementing a suggested crackdown on mortgage brokers.
The most important recommendation for our clients is 7.1 – compensation scheme of last resort. The Government has agreed to this recommendation by stating:
“For the first time the Government will establish a compensation scheme of last resort to ensure that consumers can have their case heard and be confident that where compensation is owed it will be paid. This will be a scheme paid for by industry reflecting their obligation to right their wrongs.”
ASIC has largely won a landmark case against Melbourne businessman Bill Lewski, former federal health minister Michael Wooldridge and other directors of failed property group Prime Trust, with the High Court ruling the men had breached their duties as directors. The High Court found it “cannot ignore the injustice caused to members by an amendment that permits $33 million of their equity to be paid away without authority”. The Federal Court is to reassess the penalties and disqualification periods for the directors.
Royal Commission into Misconduct in the Banking, Superannuation and Financial Services releases interim report.
The SR Group, along with millions of other Australians, have eagerly awaited the report by Commissioner Kenneth Hayne QC, and expect to see blistering criticism of a number of major financial institutions and financial services providers. We also expect, and certainly hope for, the recommendation of new legislation and safeguards to prevent the recurrence of the misconduct highlighted in the Commission. Reading the Interim Report it is no surprise this will be costing the banks billions of dollars in rectifying their history of bad behaviour. Here's a look at what the figures could potentially be.
In 2017, Australian’s lost A$31.3 million to investment fraud schemes, per the May 2018 report by the Australian Competition and Consumer Commission (ACCC). This figure is almost certainly an under-representation on the total amount lost, as investment fraud is one of Australia’s least reported crimes, mostly due to shame or embarrassment of the victims. But don’t be embarrassed, investment frauds are becoming more sophisticated and harder to recognise, and with over 200,000 reports of scams last year, you are certainly not alone.
The royal commission will spend the next two weeks hearing evidence about misconduct and conduct falling below community expectations within Australia’s superannuation sector. We are representing many people that have been mislead and their nest egg was not what they expected for retirement. Reform is needed especially with our ageing population.
Between managing company finances, meeting taxation requirements and keeping your staff paid, as well as running a profitable and competitive business, managing a small business can certainly be a big job. It’s easy to get caught up in the day-to-day operations of the business and neglect your overarching responsibilities, but we must ensure we don’t fall into this trap, as this often leads to a downward spiral which can be impossible to recover from. Managing your cash flow properly will go a long way to helping you stay on top of the ongoing taxation and employee obligations in your capacity as director. As an accountant, you should be communicating regularly and clearly with your clients to ensure they fully understand their cash flow position and cash forecast for the next few months.
Mali De Castro
It is very apparent that the Franchising Code of Conduct is blatantly obsolete, and franchisees are the ones suffering. Many franchisees are trapped in suffocating and unprofitable franchise agreements, turning their dream business opportunity into a nightmare. We represent a number of franchisee’s in their fight against subpar franchisors and their unfair business models. If you are suffering due to your franchise agreement or your franchise conditions, we can assist.
Renewed calls for a last resort compensation scheme to cover customers when their adviser's firm ceases to exist
SR Group is standing firmly with Professor Ramsay's review for the federal government recommending the establishment of a compensation scheme of last resort for victims of poor financial advice. With the Royal commission dedicating public hearings to financial advice and Dover showcased it is an area needing the most immediate attention of last resort compensation. Time for reform.
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