The Financial Planning Association earlier this year urged the Federal Treasury to redesign the proposed industry funding model and registry search fees for the Australian Securities and Investments Commission (ASIC) to ensure the capture of large bank-owned licensees avoiding the need to levy smaller licensees.
In a submission filed with the Treasury in February and made public in recent weeks, the FPA pointed to the intended funding formula for ASIC’s close and continuous monitoring of large licensees noting that it involved two criteria – at least $1 billion in deposit products or at least 1,000 relevant providers.
In doing so, the FPA said it was concerned that the criteria was set too high and “could be avoided by those entities subject to this extra type of regulatory oversight”.
It then pointed to the wealth management businesses owned by the major banks, AMP and IOOF and the use of multiple licenses.
“As at June 2018, only one licensee met the criteria of 1,000 relevant providers,” it said. “This is partly due to the structure of the industry where it is very common for large institutions to hold multiple AFSLs all reporting to the parent company of the group.”
“Similarly, the alternate criteria of holding a total value of deposits of at least $100,000,000,000, may capture some parent companies but not all,” the submission said. “For example …. while the Commonwealth Bank may have a total of 1,557 advisers, this advice is provided under 5 separate licensees.”
It said that while the Commonwealth Bank might meet the criteria of holding a total value of deposits of at least $100,000,000,000, the licensees within the Commonwealth Bank group would not.
“There may also be some entities in the future, subject to this new additional ASIC activity that will not meet either criteria. This can be demonstrated by ASIC’s Wealth Management Project which focused on the standard of advice and remediation programs of the largest financial advice firms,” the submission said.
The FPA said it was suggesting that the criteria for the sub-sector for entities subject to “close and continuous monitoring by ASIC” be clear to ensure it captured those subject to such activity without inadvertently applying to entities who are not imposed with the extra regulatory oversight.
“Otherwise there is a risk that any shortfall in cost recovery will fall back on the entire industry, and that small licensees in particular will bear the unintended consequences,” it said.