Avoid costly ASIC industry funding model say stockbrokers

The impact of the industry funding model for the Australian Securities and Investments Commission (ASIC) has so negatively impacted the industry that companies are strongly resistant to it being applied to the Australian Securities Exchange (ASX).

The Stockbrokers and Investments Advisers Association (SIAA) has made clear it is strongly opposed to the ASX imposing a cost recovery model for clearing and settlement services which substantially emulates the methodology of the ASIC industry funding model.

In doing so, the SIAA has declared that the ASIC model has given rise to “unchecked rises” as “the model includes no incentive for ASIC to reduce its costs”.

The SIAA said it had warned of just this outcome when the model was first proposed and its warnings had come to pass.

“The model has resulted in leviable entities being subject to higher ASIC levies each year. In fact, the levy imposed on the financial advice sub-sector became so unsustainable that the government was forced to freeze the levy for two years because the levy estimated for the 2020/21 year was a staggering 246% increase over the 2018/19 estimate,” the SIAA told the ASX.

“Notwithstanding, a Treasury review, the ASIC Industry Funding Model remains unchanged and each year our members are required to pay more ASIC levies as a result.”

“Our members are therefore understandably concerned that ASX is proposing to adopt a cost recovery model for clearing and settlement pricing. Under the proposed model there is no incentive for ASX to control its costs. SIAA recommends that ASX reviews the model to include a cost incentive feature.”

“It is unclear to our members what change will be made to current pricing as a result of this new model. Will our members be required to pay more or less for the clearing and settlement services they currently receive?”

“We strongly recommend that ASX provide our members with a preliminary view of what prices would be generated by the model and greater detail on how the model would work so that our members have a better view of what prices they could expect to pay if this new policy is adopted. “

The SIAA said it supports transparent, fair, reasonable and more competitive pricing being offered for the clear and settlement services currently provided and consider that to enable a competitive outcome it is vital there is regular and transparent review of the pricing of the clearing and settlement services against comparable markets overseas.