The Financial Planning Association of Australia (FPA) has called on the government to expand the base of its proposed compensation scheme of last resort (CSLR) to reflect the jurisdiction of the Australian Financial Complaints Authority (AFCA).

Reacting to the release of the Senate economic legislation committee’s report, which recommended the passage of the compensation scheme of last resort in its current form, the FPA argued that expanding the definition was the only way to ensure the sustainability of the scheme for consumers and fairness for contributors.

In a statement on Tuesday (15 February), the FPA said that victims of financial misconduct who have received a determination from AFCA deserve access to compensation if their determination goes unpaid.

“In its current form, the model will limit consumer access to the scheme – leaving Australians unprotected if they invest in products such as managed investment schemes that later collapse,” Sarah Abood, chief executive officer of the FPA, said.

Ms Abood pointed to recent investigations and examples of financial wrongdoing that have highlighted the inadequacy of the government’s approach to the implementation of recommendation 7.1 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

“The FPA, along with 14 other industry and consumer bodies, advocate for the expansion of the CSLR, and the Senate economic reference committee’s own report into the Sterling Income Trust recommends the same,” Ms Abood said.

“With the proposed CSLR model, the government has missed an important opportunity to ensure financial services consumers receive adequate protection.

“It has also failed to ensure that financial planners are not left facing all of the costs to establish and maintain a scheme that will only do part of the job.”

The government’s CSLR model has been widely criticised over its limited coverage of financial products and services.

According to critics, consumers who have invested in managed investment schemes, such as victims of the Sterling Group and Sterling Income Trust, have been hung out to dry.