Submissions on Treasury’s consultation paper Proposed Industry Funding Model for ASIC closed on 9 October, and the Governance Institute was quick to label the proposal “just not good enough”.
While the Governance Institute submission stated “in-principle support” for an industry-funding model for ASIC, it was very critical of the proposed model.
“[The proposed model] provides no certainty that there will be increased benefits to market participants or enhance market integrity overall,” said the Governance Institute.
“We also note that no alternative options were canvassed as to how an industry-funding model could operate. The lack of capacity to weigh alternative approaches and consider different models renders it difficult to arrive at an informed response.
“While it is possible that Treasury has considered alternative approaches, the absence of information as to why they have been discarded does not allow regulated entities to consider the proposed model within context,” said the submission.
The Governance Institute said the proposed funding model takes a ‘one-size-fits-all’ approach.
“The levy proposal is not proportionately borne by those who need the most regulation,” said the submission.
“[The proposal] does not take into account that higher market capitalisation companies are generally better resourced and cannot be assumed to demand frequent regulator attention, whereas often smaller-cap companies are models that may be likely to take up more regulatory focus, time and attention.
“ASIC’s supervisory activities may be lessened rather than intensified when companies that are better resourced have the capacity to put in place strong internal governance, risk and compliance programs that are assessed regularly, with training provided to employees to ensure compliance.
“Notwithstanding this, large, publicly listed companies will pay a larger annual levy,” said the Governance Institute.
In addition, the consultation paper makes no mention of ‘phoenix’ activity, which does not occur in the listed market and requires significant attention from ASIC, said the submission.
Governance Institute chief executive Steven Burrell said Treasury’s proposal for an industry-funded corporate regulator needs “more meat on the bones”.
“We need to know why this particular model – as distinct from alternative models working well in other jurisdictions or other possibilities that may have been canvassed but not disclosed – is better placed to improve and enhance the integrity of our markets. The consultation paper fails to do that,” Mr Burrell said.
“This paper should be the first step in a thorough consultative process culminating in a second, more detailed discussion paper.
“It should contain convincing evidence of the benefits this model will deliver, examples of models in other jurisdictions that have improved market integrity along with an explanation as to why they have been discarded.
“Most importantly, we need to know why this model is the preferred option. ASIC goes to the very core of instilling trust and confidence in the market. It deserves and must receive a proper and considered policy process. Anything less is not acceptable,” Mr Burrell said.
