Two-tiered ASIC levy recommended to protect small licensees
The Government has been urged to implement a two-tiered levy to fund the Australian Securities and Investments Commission (ASIC) to ensure small financial advice firms do not end up funding the misdeeds of large financial advice licensees.
Referencing the exit of the banks from financial planning, the Financial Planning Association (FPA) has claimed “urgent and immediate intervention is needed on the part of the Government to ensure that the six largest financial planning licensees are charged a separate and specific ASIC levy for the cost of ASIC’s ongoing oversight of their remediation programs and litigation”.
As well, the FPA wants the same provision extended to any additional large licensees with remediation programs as and when they occur to ensure small business is not paying for the misconduct of large corporations.
In its submission to Treasury’s review of the ASIC industry funding model, the FPA said that it was aware of activities being undertaken by ASIC “that have nothing to do with financial planners, yet they are placing that cost on financial planners through this levy”.
“Given the significant inequity of the ASIC industry levy, the FPA strongly supports a framework be developed to provide a more equitable and predictable annual levy, and for the year-on-year increases to better reflect the capacity of the financial planning profession, before more financial planning practices are forced to close,” the submission said.
The FPA also raised the crucial question of the levy being used to fund ASIC litigation.
“It is unclear whether ASIC is obligated under legislation or regulations to recover the cost of litigation and investigations relating to court action in the industry levy,” it said. “Consideration should be given to excluding these costs from the levy where these matters are ongoing, until the litigation proceedings are complete and the matter has been determined by the court.”
The FPA said this would make it clear whether ASIC has achieved a successful outcome in relation to the litigation, and therefore whether costs will or will not be recovered from the entity subject to litigation investigation and proceedings.
The FPA is also urging that the ASIC levy not be increased to cover the operating of the single disciplinary body.
“The Cost Recovery Levy Regulations prescribe that certain amounts are not part of ASIC’s regulatory costs and therefore will not be recovered under the industry funding regime, including the costs of operating the committees convened on an ad-hoc basis to consider disciplinary matters relating to registered liquidators (registered liquidators disciplinary committees),” it said.
“The FPA considers a similar approach should be adopted for Financial Services and Credit Panels convened to consider disciplinary matters relating to registered relevant providers following the establishment of the new single disciplinary body for financial advisers within ASIC.”
All good suggestions from the FPA, but can I add another. If ASIC’s fees increase by a single cent to fund the so called “Single Disciplinary Body”, then financial advice should be removed from AFCA’s jurisdiction. Advisers should not be forced to pay for multiple disciplinary bodies, particularly when the Royal Commission recommended a genuine single disciplinary body, which by definition cannot exist when it is one of many.
AFCA’s annual fees may be relatively small, but the cost impact of AFCA on financial advice is enormous. AFCA’s kangaroo court processes, denial of natural justice, and encouragement of vexatious complaints, forces the honest majority of advisers to incur huge additional overheads to defend against potential injustice. AFCA’s processes drive up PI premiums significantly, and intimidate advisers that are unfairly targeted to pay large settlement amounts to avoid potentially worse outcomes. AFCA has been a significant contributor to Australian consumers being unable to access affordable professional advice.
Typical FPA. Instead of saying the model is clearly flawed/unjust and should be scrapped altogether they say just charge one party more than the other. These fees aren’t paid by the licensee they are simply pushed through to the individual advisers, who in the vast majority are all small businesses. Has the FPA actually ever spoken to an individual adviser, who they supposedly represent, to ask what they want?
FPA too busy working against advisers, pandering to Govt, FSC etc & raking in ludicrous salaries for themselves.
The trap was laid when the Banks advocated for the ‘users pay’ approach to the funding levy – sounded logical at the time, but knowingly who will be the ultimate beneficiary of such model.
Hey FPA, guess who pays the ASIC levy? All costs are passed back to the adviser, so under this proposal are they saying those advisers under large licensees pay more than advisers with small licensees? Both are likely to be small businesses too.