The Government has released a report into Compensation arrangements for consumers of financial services.

The report assesses the need for the introduction of a statutory compensation scheme.

The report:
•concludes that it would be inappropriate at this point in time, to introduce a ‘last resort’ compensation scheme, without first strengthening the existing compensation arrangements;
•recommends strengthening the existing compensation arrangements, in particular the holding of adequate professional indemnity insurance cover, greater ASIC monitoring and capital adequacy requirements to ensure that licensees have the financial resources to meet compensation liabilities, and
•suggests that consideration be given to the merits of product issuers being required to take greater responsibility for protecting consumers of their products and recommends a more detailed and targeted review into these arrangements.

The Government is seeking feedback from on the recommendations in the report and will take into consideration any recommendations resulting from the Parliamentary Joint Committee on Corporations and Financial Services’ (PJC) inquiry into the collapse of Trio Capital before responding to the report.

The Government anticipates finalising its formal response to Mr St John’s report in the next three months.