The Federal Government has released a proposal paper on the industry funding of the Australian Securities and Investments Commission (ASIC), which proposes to charge a levy on the financial advice sector and Australian financial services licensees (AFSL).
The paper, titled “Proposed Industry Funding Model for the Australian Securities and Investments Commission”, said it was expected to cost ASIC $24 million in 2016/17 to regulate the financial advice sector, which accounted for 10 per cent of ASIC’s budget for regulatory activities.
“ASIC’s work includes monitoring financial advisers’ compliance with their advice conduct obligations under the Corporations Act, identifying breaches of the Corporation and ASIC Acts, and enforcement,” the paper said.
“ASIC also engages with stakeholders to ensure risks are identified and addressed and provides guidance to financial advisers regarding their legal obligations.”
In the paper, ASIC has proposed to charge a levy based on the number of advisers registered on the Financial Advisers Register (FAR) for AFS licensees who provided personal advice on Tier 1 products to retail clients, positing that licensees with a greater number of advisers would have more clients, hence requiring larger levels of regulatory oversight by ASIC.
At this point, the paper proposed the following:
- Personal advice providers on Tier 1 products, which would have 2,150 licensees and 23,000 advisers: $22 million;
- Personal advice providers on Tier 2 products only to retail clients, which would have 614 licensees: $1,500 flat levy, with $0.9 million to be recovered;
- General advice provider to retail and wholesale clients, which would have 898 licensees: $920 flat levy with $0.8 million to be recovered; and
- Wholesale advice provider to wholesale clients only, which would have 1,370 licensees: $170 flat levy with $0.2 million to be recovered.
The August 2015 consultation paper proposed a levy on financial advice providers on Tier 1 products that had a fixed component of $1,350 and a variable component of $470 per adviser.
However, submissions strongly opposed this, fearing it would place undue burden on smaller licensees compared to larger licensees due to the fixed model. This proposals paper has moved to a fully variable levy.
When broken down by activity undertaken by ASIC to regulate financial advice, enforcement utilised the most resources, costing $12.2 million while surveillance stood second at $6.9 million.
ASIC has not proposed to charge a separate levy on robo-advice providers at this time as it looked to facilitate innovation but left the door open for such a levy in the future.
ASIC welcomed the Treasury’s proposals paper, with chairman, Greg Medcraft, saying those who create the need for ASIC regulation should pay for it instead of the public.
“Industry funding will also improve ASIC’s transparency and accountability. That means business will better understand the job we do by having greater visibility of the cost of doing that job,” Medcraft said.
