Future of Financial Advice

Review of compensation arrangements for consumers of financial services - Consultation Paper

As part of the Future of Financial Advice (FoFA) reforms announced on 26 April 2010, the Government commissioned Richard St. John to undertake a review to consider the need for, and costs and benefits of a statutory compensation scheme. This review was announced in response to recommendation 10 of the report by the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into financial products and services in Australia.

The release of the consultation paper by Richard St. John is a key step in his preparation of recommendations to Government. Mr St. John draws attention to a number of issues on which comment is invited (raised at the end of Chapters 2 to 5). It also seeks reactions to the preliminary observations made in Chapter 5 though respondents should feel free to address other issues as well.

The consultation paper provides information, frames issues and raises questions on the need for, and costs and benefits of, a statutory compensation scheme for clients who suffer damage or incur loss as a result of misconduct by persons with whom they have dealt in the financial services sector. In particular:

  • Chapter 1 deals with the context and scope of the review. It also provides background on the overall regulatory framework for financial services and the regulatory philosophy on which it is based.
  • Chapter 2 describes the current compensation arrangements within that regulatory framework.
  • Chapter 3 addresses the operation of those compensation arrangements in practice.
  • Chapter 4 provides a comparison with compensation arrangements in other countries and industry sectors.
  • Chapter 5 provides some preliminary observations and draws out issues for further consideration.
  • Attachment A provides a summary of relevant regulations.
  • Attachment B provides a summary of compensation arrangements in the EU, Canada and the US.

Consultation Documents

Consultation Paper (consolidated) 1.2MB -
Preliminaries 205KB 1.1MB
Chapter 1 175KB 351KB
Chapter 2 329KB 732KB
Chapter 3 197KB 448KB
Chapter 4 222KB 381KB
Chapter 5 199KB 450KB
Attachment A 95KB 128KB
Attachment B 171KB 190KB
Glossary 85KB 213KB


Submissions for this consultation closed on Wednesday, 1 June 2011.

A total of twenty-eight submissions have been recieved in response to Richard St. John's consultation paper Review of Compensation Arrangements for consumers of financial services. Five submissions are confidential, and the remaining twenty-three are public, which are listed below.

ACTEK Superannuation Pty Ltd 32KB
Association of ARP Unitholders Inc 3.5MB
Association of Superannuation Funds of Australia 87KB
Australian Bankers' Association Inc 74KB
Deloitte 177KB
Financial Ombudsman Service 561KB
Financial Planning Association of Australia 212KB
Financial Services Council 1.3MB
Hayden Financial Services 105KB
Insurance Council of Australia 98KB
Keenan, Bruce 89KB
Law Council of Australia 2.3MB
Liability Reform Steering Group 417KB
Maurice Blackburn 505KB
National Information Centre on Retirement Investments Inc (NICRI) 865KB
National Insurance Brokers Association 346KB
Professional Investment Services 546KB
RADE Provident Fund 332KB
Slater & Gordon 137KB
Superannuation Complaints Tribunal 58KB
Stockbrokers Association 199KB
Van Eyk Research Pty Ltd 166KB

The opinions expressed in the submissions are those of the authors and do not necessarily reflect the views of the Government or the Treasury or Richard St. John.