ASIC warned on using regulated entities as ‘slush fund’

Mike Taylor

Managing Editor/Publisher, Financial Newswire

2 March 2023

The Government, business and the community cannot be expected to wait for the Australian Securities and Investments Commission (ASIC) to evolve into the corporate regulator that it should always have been.

As well, ASIC should not regard the entities it regulates as some sort of “slush fund”.

That is the message delivered to a key Parliamentary Committee by the Institute of Public Accountants (IPA) in a submission that has coincided with the committee investigating the circumstances surrounding a Treasury-initiated investigation into ASIC deputy chair, Karen Chester.

The IPA submission said that while it believed ASIC was attempting to address concerns expressed by government, business and the community, it was simply not happening fast enough.

What is more, the IPA submission has reinforced that the current Industry Funding Model for ASIC is not working.

“Under the Industry Funding Model (IFM), regulatory costs are recovered from the industry sectors being regulated. This captures many IPA members who hold ASIC statutory registrations (Registered Liquidators, Registered Company Auditors (RCAs), SMSF Auditors, holders of limited and full Australian Financial Services Licenses, Authorised Representatives and credit providers),” it said.

“The CRIS sets out how resources are allocated. A review of the IFM was announced in September 2022, and consultation has since closed. The review was the culmination of an extensive period of advocacy by many stakeholders who were extremely concerned about the inadequacies of the IFM.”

“Given that 83% of ASIC’s operating costs are subject to the IFM, then it is imperative that ASIC operate as efficiently and effectively as possible. Regulated entities should not be treated as some type of ‘slush fund’ where we have seen increases in levies of 160% over 2-3 years and other huge increases (with some smaller reductions).,” the submission said.

“As the IPA has stated in many other submissions, more transparency and accountability are needed from ASIC to properly assess the allocation of funds against its functions, especially supervision and enforcement which make up the bulk of the costs.”

The submission also pointed to the complex regulatory environment being overseen by ASIC and the fact that the Australian Law Reform Commission (ALRC) had described it as “impenetrable” legislation and regulation.

“We note that these factors have led some highly regarded domestic and international commentators (ALRC/ Melbourne University Law School) to allude to a blurring of the ‘twin peaks’ model of financial regulation,” it said.