The Federal Government’s proposal for industry funding of the Australian Securities and Investments Commission (ASIC) is a “one-size-fits-all approach” that could decrease efficiency and increase complexity, according to the Governance Institute of Australia.
Responding to the Government’s consultation paper, titled ‘Proposed Industry Funding Model for the Australian Securities and Investments Commission’, for which submissions closed on 9 October, the Governance Institute said the model takes a “capacity-to-pay” approach rather than imposing costs on those creating the risk.
Arguing the funding model is “just not good enough”, chief executive, Steven Burrell, said the proposal to impose costs on those creating the need for regulation through fees based on market capitalisation is based on assumptions.
“It does not take into account that higher market capitalisation companies are generally better resourced and have strong governance, risk and compliance programs. It cannot be assumed that they demand more frequent regulator attention,” he said, pointing to smaller cap companies that also demanded regulatory attention.
“ASIC resources devoted to phoenix activities that do not occur in the listed market do not even rate a mention in the consultation paper,” he said.
The Governance Institute also rejected the consultation paper’s view that larger entities were usually a greater threat to the economy as it had more investors and played a bigger role in the economy, saying the analysis does not prove this.
“Nor are we convinced that price signals will achieve greater efficiencies in the way ASIC allocates resources,” Burrell said.
“In fact, price signals have the potential to create an overtly business culture within the regulator and could be a disincentive to government to increase the pool of public funds available to ASIC.”
The second paper should include evidence of the merits of this model, demonstrate how this model has been successful in boosting market integrity in other jurisdictions, and explain why they have been removed.
