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Not enough Compensation & Accountability? Choice Petition

Friday 1 October 2021

This month will see six  reforms based on the royal commission recommendations come into action. 

However, this week also saw consumer activities Choice calling for signatories to petition for the Treasurer to do more and to move more quickly with the Royal Commission reforms.   

Choice said, “Last year, the government promised to pass two crucial royal commission recommendations to hold finance executives to account with serious penalties and to compensate victims of financial crime.”

The recommendation that the consumer protection group referring to the Recommendation 7.1 which relate to the last resort compensation last resort scheme and the Financial Accountability Regime (FAR) which would have the Australian Securities and Investments Commission equivalent of the Banking Executive accountability Regime (BEAR). 

Their concern is that the compensation scheme is ‘very limited’ scope and only goes back to November 2018 in terms of remit.

When penalties for executive misconduct, Choice expressed concern that the Treasury has decided not to go along with $1 million for misconduct. 

 The Treasury closed compensation for compensation scheme and FAR in mid-August. 

Choice said, “The government’s proposal for a compensation scheme to protect victims will exclude those impacted by property investment scams like Sterling First. Victims deserve better.”
Regulatory focus not too distant focus on far
In ASIC’s list of the priorities for supervision or market intermediaries the for the this and 2022 they indicated that they were preparing for the implementation of FAR. 

In their listing of the external priorities between this year and 2025 they said, “…driving industry readiness and compliance with standards set by law reform initiatives (including the Financial Accountability Regime, reforms in superannuation and insurance, breach reporting, and the design and distribution obligations).”
Sterling First Compensation 
But who was sterling First what did they did they do?

In May, the securities and investments commission publicised banning of former Sterling First Managing Director and the responsible manager Robert Patrick Marie form providing financial services for four years. 

In formal statement last November ASIC said, “The Federal Court in Western Australia has found Theta Asset Management Ltd (In Liquidation) (Theta) [A Stirling First-Linked entity] and its Managing Director Mr Robert Marie contravened the Corporations Act on multiple occasions in authorising the issue of five defective Product Disclosure Statements for the Sterling Income Trust.”

Between May and April in 2016 almost $17 million was raised from retail investors based on that defective PDS. 

The court found that both Theta and the Marie breached the corporations act and failed to meet their duties and as an entity and as a director, respectively. 
Choice will be using the petition to try to encourage the Treasury to strengthen the legislation. 
“We need to show the government that there is overwhelming public support for passing strong banking reforms. If thousands of us back calls for the government to keep its promise for strong protections, they’ll have to stay true to their word and fix their watered-down proposals.”