SCA-NSW launches post Netstrata investigation

There were a lot of questions that remained following the devastating report on ABC TV into allegations that strata management giant Netstrata had side-stepped regulations on declaring commissions for insurance premiums.

The company’s boss Stephen Brell stepped down as president of SCA-NSW but, given his highly influential position, that raised further questions within the strata community about how deep any problems, real or perceived, with transparency, integrity and fiduciary duties might go.

So we asked this week if SCA-NSW was conducting any kind of inquiry and the answer was a resounding ‘yes”. And meanwhile they have initiated a cross-industry appeal to the NSW Minister for Better Regulation and Fair Trading, calling for a boost in funding for the Strata Commissioner among whose responsibilities it is to ensure standards within the industry.

“SCA-NSW has commissioned a full investigation into the allegations made against Netstrata by the ABC in accordance with the SCA NSW requirements under the Professional Standards Scheme (PSS),” a spokesman told us.

“An independent investigator has been appointed who has a background in professional audits. The investigation has commenced and SCA NSW will receive a report by 31 May 2024.”

Okay, but we pointed out that this single issue has raised awareness not just about insurance commissions, but also about other long-standing concerns such as one-sided strata management contracts, conflicts of interest between strata managers, developers and strata schemes, and strata managers’ roles in promoting hidden cost embedded networks to new owners.

Is SCA-NSW considering any of these issues in any review of the post-Netstrata strata management landscape?

“SCA has taken these allegations incredibly seriously, and are acting with the utmost urgency to address them,” the spokesman said.

“We’ve been working incredibly hard over the last month to properly evaluate and action initiatives and responses that are appropriate for SCA and the industry in the wake of the allegations against Netstrata.

“These initiatives include, but are not limited to:

• Undertaking additional member audits focussing specifically on conflicts of interest and disclosure and updating ongoing audits to improve their coverage of conflicts of interest and disclosure.
• Independent investigation (as above)
• Liaison with Professional Standards Australia (PSA) who administer the SCA NSW Professional Standards Scheme (PSS).

“At a national level, SCA National Council agreed on the follow Six Steps to Ensure Confidence:

• Fast-tracking the date for the mandatory requirement for SCA members to implement SCA’s Best Practice Insurance Disclosure Guide to 30 June 2024, with full enforceability under the SCA complaints and conduct panel.
• Appointing an independent Chair for the SCA Australasia complaints and conduct panel.
• Allocating additional resources and improved accessibility to the SCA Australasia complaints process.
• Commencing the production of a rigorous best practice guideline that clearly addresses conflicts of interest in the strata sector and other disclosures, outside of insurance.
• Offering additional support for SCA member businesses to have access to appropriate resources, advice and training to improve practice where identified.
• Supporting the independent review SCA (NSW) will be conducting.

“SCA has advertised for the Independent Chair and have received applications which we are now evaluating,” the spokesman said.

“SCA has streamlined our complaints process and made more resources available to manage complaints. We continue to urge all people to use our complaints process, which we have reduced barriers to accessing.

“This is still not being utilised, despite frequent calls to consumer bodies and consumers to send complaints through this mechanism. We want to hear about poor practices in the industry, and who is carrying them out, so we can evaluate what we hear and act on it through our enforceable member Code of Conduct.”

As for conflicts of interest, he said SCA has drafted the RFP for the work to be carried out by an independent party that will inform our best practice guidelines and recommendations for structural changes to our business practices, and expect to make the appointment as soon as the proposals are received and analysed.

Meanwhile SC has engaged with stakeholders to inform them about these actions and gather their feedback.

To date, the spokesman said, they have held stakeholder briefings with:

• Australian College of Strata Lawyers (ACSL)
• Owners Corporation Network (OCN)
• Financial Counselling Australia (FCA)
• National Insurance Broking Association (NIBA)
• Insurance Council of Australia (ICA)
• Australian Consumers Insurance Lobby (ACIL)

SCA-NSW has also collaborated with OCN, ACIL, ACSL and RVRA on a joint letter to the NSW Minister for Better Regulation and Fair Trading, calling for additional resourcing for the Property Services and Strata Commissioner in the 2024/25 Budget to ensure good practice in the strata space by all practising strata managers.