The Government has given its support to a “user pays” industry funding model for ASIC in line with the recommendations of the Financial System Inquiry (FSI). A consultation paper has been issued today by Assistant Treasurer, Josh Frydenberg, detailing how the funding model will work.
The new funding model will require the biggest users of ASIC’s resources to pay up to $220 million of the $260 million the Government spends on the regulator each year. This will be raised by an annual levy calculated based on market capitalisation and an assessment of each sector’s risk to investors. The fees are likely to comprise $53 million for banks and listed companies, and $91 million for investment banks, stockbrokers, insurers, and the superannuation and financial planning industry. If introduced, the levy will be phased in over the next three financial years.
ASIC has been championing the self-funding model for the duration of current chairman, Greg Medcraft’s, tenure. Mr Medcraft has said that the costs of regulation should be borne by the market players who create the need for it, and that a self-funding model will provide sustainability of funding for the regulator through fiscal independence from Government. The Government is saying that it will increase economic efficiencies and improve ASIC’s transparency and accountability.
This is the first step the Government has taken to address the recommendations of the FSI, and one we have been anticipating because it removes the funding pressure that would act as the major impediment to the implementation of other recommendations. Further announcements are expected over the coming months. Freed from the financial burden that would arise, we expect the Government will now throw its support behind the proposals to increase ASIC’s enforcement “toolkit” through the adoption of product governance obligations and intervention powers. Today’s step is the first, but perhaps the biggest, towards a more proactive and interventionist conduct regulator in Australia.
The Treasury consultation closes to submissions on 9 October 2015. The consultation paper can be found here.