10 ways ASIC’s industry funding model could change

The government has made 10 recommendations to ASIC’s industry funding model following a Treasury review. 

The review was led by Treasury in consultation with ASIC, the Department of Finance, and the Department of the Prime Minister and Cabinet.

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The recommendations are broken down into three sections: industry funding levies; fees-for-service; and reporting, transparency, and consultation.

The 10 recommendations are: 

Industry funding levies

• Spread the recovery of regulatory costs relating to unlicensed activity across the relevant sector/s based on ASIC’s total regulatory effort for each sub-sector (within the relevant sector).
• Spread the recovery of regulatory costs relating to emerging sectors outside the existing regulatory framework across ASIC’s entire regulated population based on ASIC’s total regulatory effort for each sub-sector.
• The government should consider (at the time of approving a new policy proposal) whether to prescribe capital expenditure costs to be recovered over time either based on the useful life of the asset or another time period.
• Following public consultation, changes should be made to certain sub-sector definitions, entity metrics, and levy formulas set out in regulations to ensure they remain fit for purpose.

Fees-for-service

• The government should reaffirm its commitment that regulatory fees should be charged at a level that enables full cost recovery. In line with this, the government should adjust regulatory fee amounts to a level that facilitates full cost recovery of ASIC’s cost in providing these services, unless the government has made a decision that no fee or a partial fee should be charged.
• The government should delegate to ASIC the power to set and adjust fee amounts in subordinate legislation, with fee amounts to be reviewed every three years to reflect full cost recovery.

Reporting, transparency, and consultation

• ASIC should remove the consultation component from the Cost Recovery Implementation Statement (CRIS) process so that the CRIS is a transparency and budgeting tool for ASIC stakeholders. ASIC and Treasury to establish an alternative consultation process with industry stakeholders on a five yearly basis to examine the policy settings of the ASIC IFM.
• ASIC should cease the release of a draft CRIS for consultation and only release a final CRIS.
• ASIC should pilot and consider ways to: consolidate information regarding ASIC’s industry funding arrangements, provide more simple explanations regarding ASIC’s cost recovery methodology and the operation of the IFM, including addressing any key gaps in information and enhance and streamline the structure of the CRIS to reduce complexity for stakeholders
• ASIC should release the CRIS in June each year to enable more accurate estimated levies and a more consistent CRIS time frame each year.

Minister for Financial Services, Stephen Jones, said: “The Review found that the settings of the ASIC IFM remain broadly appropriate but that refinements can be made within the existing framework to improve the way regulatory costs are recovered and to communicate IFM settings to industry more effectively.

“The Albanese government is committed to maintaining appropriate industry funding arrangements for ASIC.The government will work with ASIC, industry, and other stakeholders to implement these recommendations.

“The government also supports ASIC taking action to implement the recommendations directed to it, to improve its engagement with industry and to streamline its reporting arrangements, particularly through its Cost Recovery Implementation Statement.”

Levy relief
The report also confirmed ASIC will not be extending the temporary freeze on levies for financial advisers. 

A temporary levy relief was provided to personal financial advice licensees for 2020–-21 and 2021–-22 in recognition of the higher levies incurred by this sector but this will not be extended further, Jones said.

This saw the per adviser levy component capped at the 2018–-19 level of $1,142, and the cost of this relief was borne by the government and not recovered through levies charged to other sectors. 

“There have been some key factors that have contributed to the increase in levies for this sub-sector such as increased regulatory focus by ASIC on this sector and structural changes in light of the Financial Services Royal Commission. 

“The Review notes that these factors are out of ASIC’s control and, given the legislative framework of the IFM, ASIC has limited power to adjust levy amounts once costs have been expended without government intervention. The Review acknowledges this type of intervention from the government is not common and not a part of the normal operation of the ASIC IFM. 

“While the total regulatory costs for the sub-sector have increased since 2017–18, the Review notes that these costs have been relatively stable since 2019–20 and in the absence of the temporary levy relief, the per adviser levy for the sub-sector would have been around $3,000.”

The review recommended reviewing each of the four sub-sectors in financial advice to determine if the existing definitions and metrics remained appropriate.