The Australian government is planning to set up a one-stop-shop external dispute resolution (EDR) body for all financial service providers in the country. It should be established by July 2018 and shall be called Australian Financial Complaints Authority (AFCA).
According to a document published on the site of the Australian Treasurer Scott Morrison, the new organization should replace the three different resolution bodies within the financial services providers sector – the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal. Membership in AFCA will be mandatory for all financial services providers in Australia. This should also include forex and CFD brokers who are currently charges of the Financial Ombudsman Service, but the document does not specifically mention them.
AFCA will mainly be in charge of overseeing and the compensation claims from clients of the financial services companies. The initial plans are for a monetary limit of of AUD 1 million and a compensation cap of no less than AUD 500,000 for financial disputes (other than superannuation disputes). The wording of the document suggests that the AFCA will not have a compensation fund itself, but will only have the power to serve as an intermediary and oversee the process.
The AFCA will be under the supervision of the Australian Securities and Investments Commission (ASIC), which will be provided with general directions power to ensure the new EDR complies with legislative and regulatory requirements.
Despite having a good regulatory framework and the ASIC providing tight oversight over the forex and CFD brokers, Australia does not have a financial compensation fund for clients of those companies. Other major regulators, like UK’s Financial Conduct Authority and the Cyprus Securities and Exchange Commission, however, have a requirement for its charges to make contributions to the respective funds in those countries. For example, UK’s Financial Services Compensation Scheme (FSCS) covers investments of up to £50,000, in case a company goes bust.