Upcoming ASIC levy should be last under existing formula

On the same day that the regulator announced the rate to apply to the 2024 Australian Securities and Investments Commission (ASIC) levy there are renewed calls for the Government to act to change the formula to defray the cost via regulatory fines.

The latest call has come from the Self-Managed Superannuation Funds Association (SMSF Association) which is calling on the Government to adopt one of the key recommendations from last week’s Senate Economics References Committee report into ASIC.

That report, which carried largely bi-partisan support, urged changes to the industry funding model to encompass more of the proceeds of regulatory fines being applied to funding the regulator and less reliance on the so-called ASIC levy.

The SMSF Association pointed out the degree to which the ASIC levy had increased year on year and the disproportionate amount that is being carried by financial advisers and their licensees.

“The first levy in 2017-18 was $934 per adviser compared with the 2022-23 levy of $2,818 that was reduced from the original estimate of $3,217 after strong industry push back,” the SMSF Association said.

“Advisers are nervously waiting for the 2024 levy rate, which is yet to be determined. Noting that the sector will for the first time incur a levy to fund the recently commenced Compensation Scheme of Last Resort (CSLR), resulting in a further $1,186 in costs being charged to each individual adviser,” it said.

SMSF Association chief executive, Peter Burgess said his organisation had long advocated for a review of the Industry Funding Model (IFM) ‘which is clearly not fit for purpose”.

“The underlying principle of the IFM where well-behaved firms foot the bill to regulate poorly behaved firms is fundamentally flawed and unsustainable.”

Burgess noted that the Senate Committee report had highlighted that IFM model was estimated to be funding up to 83% of ASIC $422 million Budget appropriation.

He said the Senate Committee report had added that the IFM has been ‘negatively received by participants to this inquiry, characterising the funding model as unfair, poorly administered, and counterproductive’.

“The Association can only concur,” he said.

Burgess said the Report’s third recommendation that urges the “shortcomings” in Australia’s system for handling reports of alleged corporate misconduct to be addressed should also be implemented.

“We note that ASIC’s failure to act in a timely manner was a significant factor in the Dixon Advisory case cited in the Report.

“As the Report says, ‘ASIC’s enforcement actions in response to the now-defunct Dixon Advisory are illustrative of its enforcement woes. It took ASIC two years to settle its case against Dixon, and the company was penalised $7.2 million – a fine unlikely to ever be paid’”.

“It highlights why it’s critically important for the corporate regulator to move swiftly to investigate reports of misconduct so that consumers are protected.”

As part of Recommendation 3, the Report also wants the regulator to develop consistent

standards to transparently report information to the public about alleged misconduct, as well as timely responses to people who submit reports of alleged misconduct.

“Both these recommendations deserve to be implemented. What we have learnt from the Dixon Advisory fiasco is that because of the regulator’s tardy response to consumer complaints, the advice industry could now be left to foot much of the bill for all the unpaid Dixon compensation claims that could total many millions of dollars.”