AFCA to reopen complaints over Ray Jones’ Sterling First as Federal resort compensation scheme beckons

The financial services umpire is reviving stalled complaints by alleged victims of failed lease-for-life group Sterling First amid hopes some may qualify for up to $150,000 in compensation. The Australian Financial Complaints Authority said it would review the cases to see if the alleged victims were eligible for a long-delayed, Federal-funded last resort compensation scheme due to take effect late this financial year. Around 100 West Australians with limited retirement savings lost upwards of $18 million and many were made homeless after the May 2019 collapse of Sterling First. AFCA’s review will include a swag of complaints going back up to four years that have not yet been decided. It will also re-open complaints where it has made a positive determination, but no payment has been made by the liquidators of broke service providers. AFCA’s reopening of the files has been prompted by the Federal Parliament in June passing a weakened version of a last resort compensation scheme for victims of poor financial advice, securities dealing and credit provision. In what was seen as a blow to many Sterling First victims hoping to receive compensation, the scheme put forward by the new Labor Federal Government in August 2021 controversially excluded claims over managed investment schemes. Battling seniors had invested six-figure sums with Sterling First schemes from the middle of last decade until 2019 with a promise of returns of 9 per cent-plus. That invested capital and the promised returns were to have been used to pay the rent on lifetime leases on rental properties, some of which were owned by Sterling First companies. The collapse prompted a Parliamentary inquiry, protests about alleged delays in State and Federal regulators moving and an intensified investigation by the Australian Securities and Investment Commission. ASIC last week charged Sterling First directors Ray Jones, Ryan Jones and Simon Bell with multiple counts of allegedly aiding and abetting dishonest conduct by a financial services provider. The Sterling First collapse also triggered a variety of complaints to AFCA. With liquidators of the failed companies having little or no money to pay-up on successful complaints, AFCA paused its processing to April 2021 until a long-delayed compensation scheme had gone through Parliament. The looming AFCA review is set to feature complaints from alleged victims against failed financial planning firm Libertas and scheme responsible entity Theta Asset Management. AFCA said it would now have to consider a variety of questions for each complaint to determine if they fell within the scope of the last resort compensation scheme. AFCA warned not “every complaint against a financial firm in liquidation” will be eligible for a payout because the last resort’s schemes limitations to certain financial services and products. It also warned the final decision on any last resort payment would be ultimately determined by a compensation scheme board that the complaints body was in the process of setting up. AFCA said people would be able to lodge claims with the compensation schemes board from April 2024. AFCA was unable on Tuesday to provide details of the number of complaints it had received related to Sterling First. The AFCA complaints are unrelated to the criminal charges against Ray Jones, Ryan Jones and Simon Bell. They were each released by Perth Magistrates Court last Friday on bail totalling $100,000 each to appear in Stirling Gardens Magistrates Court on February 7. They have not entered pleas.