As FX News Group has reported, the Federal Government of Australia has released the draft legislation to establish the Compensation Scheme of Last Resort (CSLR).
Today, the Australian Financial Complaints Authority (AFCA) posted a set of updates on the matter. In short, the establishment of such a scheme of last resort means that customers of insolvent businesses stand a chance to recover some of their money.
From April 2020, AFCA paused complaints against insolvent financial firms financial firms while awaiting detail of the scope and timing of a Compensation Scheme of Last Resort (CSLR).
The establishment of the Compensation Scheme of Last Resort will support ongoing confidence in the financial system’s dispute resolution framework by facilitating the payment of compensation to eligible consumers who have received a determination for compensation from the Australian Financial Complaints Authority (AFCA) which remains unpaid.
Complaints against insolvent financial firms and other complaints that were on pause while awaiting the introduction of CSLR will continue to be paused and will be assessed once the legislation has come into effect.
AFCA will only be able to fully assess the impact of the CSLR to a complaint when details of the scheme are finalised and legislated by the Government. AFCA will review all relevant complaints as soon as that occurs.
AFCA will contact all parties to discuss the status of paused complaint after that assessment is completed.
This development gives hopes to clients of a number of insolvent financial services providers, including FX and CFD brokers.
One of these cases is Berndale Capital Securities Pty Ltd. The Australian Securities and Investments Commission (ASIC) cancelled Berndale’s Australian Financial Services Licence (AFSL) in November 2018. On 18 April 2019 the Federal Court appointed Rachel Burdett-Baker and Bruno Secatore of Cor Cordis as Receivers and Managers of Berndale. On 11 October 2019 the Federal Court appointed Rachel Burdett-Baker and Bruno Secatore of Cor Cordis as Liquidators of Berndale.
Another business whose customers may benefit from the new scheme is USGFX (Union Standard International Group Pty Ltd). ASIC advised in its statement of 18 September 2020 that it has cancelled USG’s financial services licence on 14 September 2020 under section 915B of the Corporations Act 2001 (Cth) (Corporations Act).
On 8 July 2020, Peter Paul Krejci & Andrew John Cummins of BRI Ferrier were appointed as administrators of Union Standard International Group. On 3 September 2020, they were subsequently appointed Joint and Several Liquidators of the company.
Customers of Equitable Financial Solutions Pty Ltd, MyPlanner Australia Pty Ltd, Mayfair Group of companies, as well as Sterling group are also set to benefit from the scheme of last resort.