The Australian Securities and Investments Commission (ASIC) forecasts its efforts to regulate the financial advice sector will cost $29.5 million, which is 12 per cent of the total regulatory costs it will recover in 2017/18.
The corporate regulator released its Cost Recovery Implementation Statement, which includes estimated costs for ASIC’s 2017/18 regulatory activities. ASIC said in 2017/18, $246.4 million of ASIC’s total budgeted resources of $387.7 million (around 64 per cent), would be recovered through levies on the industry.
Of the costs to be recovered from the advice sector, ASIC estimated $26.15 million, or 88 per cent, would be recovered from licensees that provided personal advice to retail clients on relevant financial products, $460,000, or two per cent from licensees that provided personal advice to retail clients on products that were not relevant financial products, $2.02 million, or seven per cent from licensees that provided only general advice and $870,000, or three per cent from wholesale advice providers.
In 2017/18, ASIC’s focus would include:
- Risk-based surveillance of the practices of financial advisers, based on ASIC’s “detect, understand, and respond” approach to identifying and addressing misconduct and risk of misconduct;
- Advice compliance at the five largest financial advice firms;
- Ensuring accountants who have recently entered the new limited licensing regime comply with the law when providing advice, and accountants who were providing unlicensed financial advice;
- Reviewing life insurance statements of advice (SOAs) and carrying out surveillance of life insurance advisers to test whether their advice complied with the law;
- Starting a “shadow shop” and surveillance to assess the currently quality of advice and backing the Government’s initiatives to improve professional standards of financial advisers; and
- Revising guidance on education and training advisers who provided personal and general advice to retail clients that are no longer relevant financial products, and ASIC’s guidance on approval of code compliance schemes.
ASIC has budgeted almost $9.8 million for enforcement and $2.4 million for surveillance.
The report comes after the Federal Government announced an industry funding model for ASIC, under which those who create the need for ASIC regulation would bear the cost through levies.
ASIC is inviting submissions by 1 November, with the final report on costs to be published in early 2018.