ASIC has operated outside the Commonwealth’s main accountability framework for defective administration since 2013. Every other federal department and agency falls under the Compensation for Detriment caused by Defective Administration scheme, which requires government bodies to pay out when their mishandling causes financial loss to individuals. ASIC does not.
A petition signed by over 2,000 people has been lodged in parliament calling for that exclusion to end. The lead petitioner lost money in a property scheme the regulator allowed to run despite it being unlicensed. The case highlights what happens when the watchdog’s own failings have no financial consequence.
How the exclusion works in practice
The CDDA scheme applies to non-corporate Commonwealth entities. If the Department of Housing, Defence, or Social Services makes an administrative error that costs you money, you can file a claim. The department reviews it, and if the claim is found valid, compensation follows.
ASIC sits outside that process. Investors who allege the regulator failed to act on warnings, allowed unlicensed operators to continue, or botched an intervention have no formal path to seek compensation for those administrative missteps. The exclusion has been in place for 11 years without parliamentary debate or public explanation.
The petition was found in order by the Standing Committee on Petitions. The responsible ministers have 90 days to respond.
The case that triggered the push
The petition centres on a collapsed property scheme that raised over $122 million from investors. The scheme was never licensed as a managed investment scheme, a requirement under law. ASIC received complaints about its conduct for years but did not wind it up. A Supreme Court later ruled it had been operating illegally.
Investors were left to fund their own court action to shut it down. By the time the scheme was wound up, most of the money was gone. Those investors then sought compensation under the CDDA framework, arguing ASIC’s failure to intervene earlier amounted to defective administration. Their claims were rejected on the basis that ASIC is excluded from the scheme.
The catch
- ASIC has been carved out of the Commonwealth’s defective administration compensation framework since 2013
- Every other federal entity is included
- Investors alleging regulatory failure have no formal claim pathway
- The exclusion has never been debated or legislated explicitly; it exists by omission
Why this matters beyond one scheme
The carve-out creates a one-way accountability structure. ASIC can pursue companies and individuals for breaches, issue fines, and ban directors. But when the regulator itself is accused of administrative failure, there is no mechanism that mirrors the one available for other parts of government.
This is not about second-guessing judgment calls or policy priorities. The CDDA scheme exists to address clear administrative errors: delays that breach timeframes, failures to follow procedure, decisions made on incorrect facts. The question is whether ASIC’s administrative processes should be subject to the same review and compensation framework as every other federal body.
For property investors, the stakes are practical. ASIC complaints in the credit category have jumped as scam reports surge, and unlicensed schemes continue to surface despite regulatory oversight. If the regulator’s own handling of those cases causes additional loss, the current framework offers no recourse.
What real reform would require
Closing the loophole means either formally including ASIC in the CDDA scheme or creating an equivalent pathway with the same procedural safeguards: independent review, defined timeframes, published decisions.
The liability risk is real. If ASIC were subject to the same rules as other agencies, claims would flow from every major collapse where the regulator had prior notice. That financial exposure is likely why the exclusion has remained in place without challenge.
But the alternative is a regulator that operates with fewer accountability checks than the departments it oversees. That trade-off becomes harder to justify as private credit property loans face audit crises and mortgage fraud rings are exposed in the hundreds of millions.
What could stall this
The government has three obstacles to navigate if it moves to include ASIC in the compensation framework: the immediate fiscal cost of existing claims, the ongoing liability from future cases, and the political optics of appearing to undermine the regulator’s authority.
The petition gives parliament a formal reason to address the gap, but there is no legal requirement to act. The 90-day response window means a decision will land in mid-year, which could align with budget discussions or be deferred to a broader review of financial services regulation.
If the exclusion remains, expect more court challenges and louder calls for a standalone external review body with real enforcement power. Wealth advice regulation has already tightened, and pressure is building for the same accountability standards to apply to the regulator itself.
Scenarios for the next six months
Base case: The government responds with a commitment to review ASIC’s exclusion as part of a wider look at compensation frameworks. No immediate change, but the issue stays on the agenda through 2026.
Upside: Ministers announce ASIC will be brought into the CDDA scheme with a staged rollout, starting with claims from the past three years. Liability is capped and rules are tightened to prevent frivolous claims.
Downside: The response defends the status quo, citing ASIC’s unique role and existing internal review processes. The exclusion remains, and investors are directed to the courts or the Ombudsman, neither of which offer compensation pathways.
Next move if this affects you
If you have lost money in a scheme where ASIC had prior warnings and failed to act, document the timeline: when complaints were made, what action ASIC took, and when the scheme collapsed. That record will matter if the framework changes or if you pursue other legal options.
For active investors, the regulatory gap reinforces the case for independent due diligence. Check whether a scheme is licensed, verify the entities behind it, and don’t assume ASIC’s silence means approval.
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General info, not financial advice.
