Proposed funding model for ASIC

Interested parties have been invited to comment on the proposed industry funded model for the Australian Investments and Securities Commission (ASIC).

All submissions must be made by Friday 9 October 2015 and can be lodged electronically or by post. Electronic lodgement is preferred.

The announcement follows the release of the final report of the Financial System Inquiry (FSI) by the Federal Government on 7 December 2014, which explored the “transparency, accountability and capabilities of Australia’s financial regulators”.

In regards to ASIC, the FSE recommended that the Government adopt an industry-funding model. While most understand the importance and effect of a well-funded corporate regulator but there are differing opinions as to how an industry model should operate. As such the Government is seeking various stakeholder contributions.

In addition, the Government considers that an industry funding model for ASIC would:

• Ensure that the costs of the regulatory activities undertaken by ASIC are borne by those creating the need for regulation (rather than all taxpayers).
• Establish price signals to drive economic efficiencies in the way resources are allocated in ASIC.
• Improve ASIC’s transparency and accountability.

The reasoning behind the proposal is that ASIC is not seen to have transparent pricing and that industry and consumers do not have a clear understanding of the costs of ASIC supervision.

Generally the policy of cost recovery is preferred where a user of the service is identifiable. However, this is not the case in areas such as policy development and law enforcement. Under an industry funding model for ASIC, the Government would not seek to cost recover some of ASIC’s budget funding.

Currently, only around 15 per cent of ASIC’s costs are recovered through levies and fees on industry. For example, market operators and participants pay quarterly fees to offset the costs of market supervision; entities regulated by APRA pay annual levies to offset the costs of certain regulatory activities; and all regulated sectors pay fees for specific ASIC services.

The government is also currently undertaking a tender process for ASIC’s registry business which is understood to be highly profitable, and has stated this is not included in the consultation paper consideration.

Submissions on the consultation paper will assist the Government's consideration of whether to accept the Inquiry's recommendation.