Federal Parliament Introduces ASIC Industry Funding Model

On 30 March 2017, the Federal government introduced into the House of Representatives a package of three Bills which would create an industry funding model for the Australian Securities Industry Commission (ASIC) which is designed to ". . . recover ASIC’s regulatory costs from the entities that create the need for regulation". The three Bills contained in the package are the:

•  ASIC Supervisory Cost Recovery Levy Bill 2017 (Cth) (the Levy Bill);
•  ASIC Supervisory Cost Recovery Levy (Collection) Bill 2017  (Cth) (the Collection Bill); and
•  ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Bill 2017 (Cth) (the Consequential Amendments Bill).

The Bills result from the government's announcement on 20 April 2016, that it would introduce an "industry funding model for ASIC", with the intention of having it commence in the second half of 2017. In general terms, the three Bills are the result of a long Treasury consultation process that commenced on 22 February 2017 and only recently concluded in early March 2017.

Industry Accountability a Key Objective

In the second reading speech to the Levy Bill the Minister states the reason for introducing an "industry funding model" for ASIC is to "make industry more accountable for its behaviour and make ASIC a stronger regulator". The Bills are seen as a critical component of the government's plan to improve outcomes in the financial services sector and in the Minister's speech are said to build on other government measures in this area which include:

•  $127.2 million to enhance ASIC's powers, data analytics and surveillance capabilities and to accelerate measures recommended by the Financial System Inquiry (the FSI);
•  a comprehensive review of ASIC's enforcement and penalties regime to ensure that it has the tools to adequately deter    misconduct and to foster consumer confidence; and
•  the ASIC capability review, which made a number of recommendations to ensure that ASIC is operating in line with global best practice.

The adoption of industry funding of ASIC is said by the government to more closely align ASIC's funding model with  the funding model of the Australian Prudential Regulation Authority (APRA), and also a number of international financial sector regulators including the Financial Conduct Authority in the United Kingdom and the Securities and Exchange Commission in the United States.

Benefits Flowing from the Legislation

The benefits said to flow from the legislation are:

•  improved equity, because those entities that create the need for regulation will bear its cost - as opposed to Australian  taxpayers;
•  regulatory compliance will be encouraged, because good conduct will drive down supervisory levies, in effect good behaviour    will keep levies down;
•  improved resource allocation for ASIC, by providing it with richer data on industry activity and emerging potential risks; and
• enhanced transparency and accountability of ASIC by virtue of requiring ASIC to publish detailed accounts of its expenditure.

Details of Each Bill

Specifically, the Levy Bill imposes a levy on persons regulated by the ASIC to recover its regulatory costs. The Collection Bill empowers ASIC to collect the levy and requires entities to submit returns annually so that ASIC is able to calculate the levy, while the Consequential Amendments Bill makes necessary consequential amendments to other Acts as well as repealing the existing market supervision and competition cost recovery regime that the new "ASIC Industry Funding Model" is intended to replace.

Comment and Reaction

The Minister for Revenue and Financial Services, Kelly O'Dwyer is reported as saying that:

The Financial Planning Association (the FPA) is reported as, in its recent submission to Treasury, having expressed concerns with the industry funding model, and is reported as saying it ". . . will create a large burden on small businesses." The FPA were also critical of the consultation undertaken by Treasury and also indicated in their submission they felt consumers would ultimately bear the cost of an industry funding framework, as such cost would be passed on to consumers by the financial advice industry.

The legislation is expected to move to its next stages when Federal parliament returns for the budget session in May 2017.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

ASIC Supervisory Cost Recovery Levy Bill 2017 (Cth); ASIC Supervisory Cost Recovery Levy (Collection) Bill 2017  (Cth); ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Bill 2017 (Cth) and supporting materials as reported in the TimeBase LawOne Service

ASIC Supervisory Cost Recovery Levy Bill 2017 and Related Bills (Treasury Consultation)

ASIC industry funding model introduced into Parliament (Independent Financial Adviser)

FPA has ‘grave concerns’ with vague ASIC funding model bills (Independent Financial Adviser)

Parliament introduces ASIC funding model (Money Management)