In a submission to the Senate Economics References Committee into the performance of ASIC, the ISA pointed out that while the regulator receives more revenue than it expends, it does not keep the revenue stream.
In addition, ASIC’s funding has been separated into ‘core’ and ‘non-core’ funding in recent years – with non-core funding for specific projects taking up a large part of the regulator’s budget, said the submission.
“Tightness and inflexibility in the budget can limit ASIC’s effectiveness, turning it into a ‘desktop regulator’,” said the ISA.
Given the emerging risks and challenges in the financial system, it is “essential that ASIC is adequately funded and resourced to carry out its duties”, said the submission.
A main goal of the new government’s so-called ‘Son of Wallis’ financial system inquiry should be to ensure a reliable funding source for the corporate regulator, said the ISA.
The lobby group pointed to recent suggestions that current government funding for ASIC be replaced by an industry levy, similar to the model that underpins the Australian Prudential Regulation Authority.
“This idea, in principle, will give ASIC the ability to independently organise and plan its operation budget,” said the ISA.
A ‘user-pays’ model would ensure that the sectors of the industry that require the most supervision will be paying the most – as is the case with the Financial Conduct Authority in the UK, said the submission.
If ASIC had the ability to independently set its budget without relying on the government, there would be no need to delay important action, which would result in more effective regulation, said the ISA.
“[Another advantage is that] financial regulation is paid for by participating firms, not by taxpayers,” said the submission.
But for a user-pays model to work, ASIC would need to have a clear accountability framework to operate in, said the ISA.
The ISA also advocated for a formal secondment process between ASIC and the industry, which “will enhance ASIC’s industry knowledge”.
The corporate regulator should also have a specific mandate for regulatory policy development and public advice to government and Treasury, said the submission.
“Where ASIC has a contrary view to government policy, it is not inappropriate that this be in the public domain,” said the ISA.
