Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia and the Institute of Public Accountants (IPA) have made three coordinated submissions to Treasury addressing reforms to the Compensation Scheme of Last Resort (CSLR), enhancements to superannuation member protections, and measures to curb lead generation practices.

Across all three submissions, we emphasise that effective reform must focus on upstream conduct rather than relying on downstream fixes or layering additional regulatory complexity. In our view, regulatory responses should target the root causes of consumer harm, particularly failures in distribution, governance and product design.

Compensation Scheme of Last Resort (CSLR) – Sustainability Reforms

We consider that the current pressures on the CSLR are the result of upstream failures, including poor lead generation practices, conflicted remuneration arrangements and weak product governance. We are concerned that the scheme has become unsustainably expensive for compliant advisers, while those entities responsible for significant losses often no longer exist or are not contributing to the funding burden.

We do not support proposals to expand subrogation rights or to deduct payments from compensation, as we believe these measures increase complexity without addressing the underlying causes of consumer loss. Instead, we support limiting compensation to actual capital losses and reinforcing the CSLR’s role as a true scheme of last resort.

We recommend a stronger focus on improving product governance, addressing misconduct within distribution channels, and ensuring that Managed Investment Schemes (MISs) where they are a key source of losses contribute appropriately to funding. We also caution against introducing a complex “waterfall” levy model, as we consider this risks normalising ongoing funding shortfalls and creating cross-subsidisation across sectors.

Enhancing Member Protections in the Superannuation System

We support the objective of strengthening member protections; however, we consider that the proposed reforms risk increasing regulatory complexity without effectively preventing future failures. In our view, events such as Shield and First Guardian highlight issues related to MISs and distribution practices, rather than deficiencies in existing trustee obligations.

We do not support the introduction of platform-specific governance rules, mandatory holding limits, or increased penalties, noting that existing prudential standards already impose comprehensive obligations on trustees. Instead, we believe that greater focus should be placed on the effective enforcement of current frameworks and closer supervision of conflicts of interest.

We also do not support proposals to introduce mandatory waiting periods for superannuation switching or to restrict the deduction of advice fees. We consider that these measures would increase costs, distort competition and reduce consumer access to financial advice.

A key priority for us is ensuring that MISs are fit for purpose. This includes strengthening approval processes and requiring adequate capital to ensure that investors can be compensated in the event of product failure.

Curbing Lead Generation Activity

We identify lead generation activity as a significant source of consumer harm, particularly where it operates outside the regulatory perimeter and influences financial decisions without appropriate accountability. We consider that current reform proposals, which focus on downstream controls, do not adequately address this issue.

We propose that any party influencing consumers towards financial advice or products for remuneration should be brought within the existing AFSL licensing framework. This would ensure appropriate accountability, supervision and alignment with education standards.

We support banning unlicensed, targeted communication where it is used to capture consumer data or direct individuals toward financial products. We also support improved transparency, including the disclosure of remuneration and referral arrangements. However, we caution against unintentionally capturing general financial education or legitimate professional referrals within the regulatory net.

In addition, we support extending anti-hawking protections, applying conflicted remuneration rules to lead generators, and increasing transparency in financial advertising—such as requiring the display of licence details and strengthening ASIC’s enforcement powers.