Planners exampled in ASIC user-pays model

Financial planning firms would be made to pay for the costs of regulation according to the number of authorised representatives and employee representatives, under proposals put to the Financial Systems Inquiry (FSI) by the Australian Securities and Investments Commission (ASIC). 

While ASIC chairman Greg Medcraft has previously canvassed a “user pays” model to assist in removing the regulator from some of the Commonwealth’s Budget processes, the FSI submission makes it very clear how financial planning firms would be impacted. 

It does so by actually citing financial planners as an example, stating: “By way of example, the cost of regulatory activities would be recovered from financial advisers as part of an AFS license sector levy based on the size of financial adviser groups as determined by the number of authorised and employee representatives”. 

The submission argues that ASIC’s proposed user pays funding model “is not concentrated on increasing ASIC’s budget but on providing economic incentives to drive the regulatory outcomes set by government”. 

It said that under the proposed model, ASIC’s regulatory costs would be recovered from industry and that “costs would be recovered specifically from those who engage in regulated activities and those who benefit from a well-regulated market and financial system”. 

In what appears to be a sop to those who might fear an escalation in regulator costs, the submission said current fees would be rationalised to simplify the fees paid by industry participants who use ASIC’s services. 

“This would involve a combination of fees for services and levies and would be based on the recovery of costs attributed to regulatory activities. Fees for services would be directly linked to the costs ASIC incurs in delivering a particular service (eg, assessing applications for relief from the law),” the submission said. “Stakeholders engaged in those regulated activities would be charged the fee each time the service was required.” 

It said all costs not recovered by fees would be aggregated at the stakeholder-group level, and would form the basis of levies charged to external stakeholder groups on an industry basis.