Australia Proposes Industry-Funded Compensation Scheme of Last Resort

Industry-Funded Compensation Scheme
Industry-Funded Compensation Scheme

This scheme ensures that the funding is provided to the consumers and small businesses who are unable to meet their needs through financial service providers. So, the Government in Australia will establish a compensation scheme where the small businesses and consumers will receive compensation if they face misconduct from the financial service providers.

In February 2019, the royal commission final report which took reference from ‘Ramsay review’ which in the year 2016-2017 looked into establishing a financial arrangement to meet these disputes and complaints and alter Australia’s financial system along with it. If the report is considered, it amounts to 92% of the share of unpaid determinations.

The new scheme will be all industry-funded which will resolve personal financial advice failures and design the features with respect to the Ramsay Review. A consultation process will also be implemented to study the model and ways to implement the same efficiently.

This model studies the level to which the provision of coverage should be given with respect to cover the personal advice and at the same time funding arrangements in which the model is based on risks and how the unexpected losses to be retrieved if it requires a capital base. Along with the compensation limits to oversee how the balance is to be kept to maintain the companies paying and at the same time to ensure large losses are not met.