The federal government has announced it has commenced a review of the ASIC industry funding model (IFM) that commenced in July 2017.
Treasury will lead the review in consultation with ASIC, the Department of Finance and the Department of the Prime Minister and Cabinet.
According to the government, the review will be forward looking and focused on identifying any changes to the IFM that may be required to ensure the settings remain appropriate.
“It is appropriate to review the IFM at this point given it has now been in place for five years, and over this period there has been substantial regulatory and structural changes within industry sectors resulting in increased cost pressures within certain sub‑sectors,” the review’s terms of reference state.
A number of issues fall under the scope of the review, which will each be considered and recommendations made where appropriate.
Among them are the types of costs and nature of ASIC’s activities that are recovered from industry as well as how those costs are recovered and who they are recovered from.
“This will include considering costs recovered through levies and regulatory fees‑for‑service, but will not include a detailed examination of individual fees‑for‑service,” the terms state.
“This will also include considering whether some or all costs for certain activities such as enforcement and capital expenditure remain appropriate to be recovered through the IFM.”
The review will examine how the corporate regulator allocates costs to sub‑sectors, focusing on regulatory activity that impacts multiple sub‑sectors, the consequences of time lags between regulatory action and cost allocation, and the changes to sub‑sector composition.
Changes in levy amounts since the IFM commenced will also be examined. The terms indicate that sub‑sectors that have faced significant increases in levies, volatility in levies between different years, and variance between estimated and actual levies will be the primary focus.
The current model was the subject of significant criticism from advice and accounting industry associations after the corporate regulator last year announced that levy costs for the 2020 financial year were set to rise by more than 60 per cent on earlier estimates.
Former treasurer Josh Frydenberg later announced “temporary and targeted relief” after ASIC’s 2020-21 Cost Recovery Implementation Statement estimated a per adviser levy of $3,138.
The appropriateness of key aspects of the design and legislative framework for the IFM, the flexibility of the model to respond to changes in industry, the suitability of transparency and consultation mechanisms, and how the corporate regulator could improve the accuracy of its estimates of costs to sub‑sectors also fall under the scope of the review.
However, the terms of reference note that the review will not assess or make recommendations on ASIC’s role and regulatory remit or the corporate regulator’s performance.
It will also not examine the appropriate aggregate level of funding for ASIC, how it allocates its resources to deliver on its mandate, and registry fees currently collected by ASIC that are not within the scope of the IFM.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.