Industry bodies have given mixed reactions to the Assistant Treasurer’s issuing of a consultation paper which is seeking stakeholders’ views on changing the financing of the Australian Securities and Investments Commission (ASIC) to an industry funding model.
The new model would be based on the Government’s Cost Recovery Guidelines where the cost of regulation would be “recovered directly from sectors and entities that create the need for regulation”, ASIC said, welcoming the proposal.
The Financial Services Council (FSC) is also in favour saying “reform of ASIC’s mandate and funding arrangements is long overdue”, but the Australian Institute of Superannuation Trustees (AIST) is uneasy.
While the AIST agrees the resourcing of ASIC is vital to consumer protection Tom Garcia, the organisation’s chief executive, said its primary concern with the current funding model was transparency – or lack thereof.
“This is the priority before we look at the business model,” Garcia said.
The Australian Financial Markets Association (AFMA), which represents participants in the wholesale financial market, is also cautious. It says it is apprehensive for two reasons:
- A cost recovery model that ignores the wider public benefit from ASIC regulation is like a tax;
- There must be proper accountability for the request and use of those funds.
“The cost of the regulatory activities undertaken by ASIC will not be levied accurately on those creating the need for regulation. For example, the proposed model does not distinguish between the risks presented by individual businesses. Rather the cost will be placed on the industry participants from whom it is most convenient to collect,” AFMA said in a statement.
It went on to say under the proposed model, government will have no financial incentive to restrain ASIC’s expenditure under full cost recovery from industry – “to the contrary, it may be harder to resist political pressure for more regulation”.
ASIC’s chair, Greg Medcraft, said a model that provides more transparency and certainty around funding is something recommended by the Financial System Inquiry and the Senate Economics References Committee Inquiry.
“An industry funding model is about ensuring that those industries that need the most regulation should pay for it, rather than taxpayers,” said Medcraft.
“It is about establishing a price signal for regulation which we think will drive economic efficiencies in the way resources are allocated in ASIC.
“And an industry funding model will also improve ASIC’s transparency and accountability. That means business will better understand the job we do by having greater visibility of the cost of doing that job.”
Currently only 15 per cent of ASIC’s regulatory costs are recovered through industry levies and fees. The cost of using ASIC’s resources has grown significantly out of line with the revenue collected from sectors regulated.
Sally Loane, chief executive of the FSC, welcomed the move and said: “We have enough laws in place already to ensure consumers are protected. ASIC needs to focus on its role as a corporate regulator to enforce these laws and it needs to be properly resourced to do its job.”
Assistant Treasurer Josh Frydenberg encouraged all stakeholders who have an interest in the efficient operation of ASIC to participate in this consultation process.
The Government’s decision will also be informed by the findings of ASIC’s Capability Review.
The closing date for submissions is 9 October 2015.