The Australian Government today announced a reform package to boost ASIC’s powers and resources. The reforms include increasing some of ASIC’s powers as soon as possible and introducing a user pays funding model for ASIC. The reforms also include a review of the Financial Ombudsman Service’s small business jurisdiction.
Accelerated additional ASIC powers
The Government wishes to ensure that ASIC has additional powers “as soon as possible” and has committed Treasury to accelerate the implementation of 4 Australian Financial System Inquiry (FSI) recommendations. The Government had already agreed to implement these recommendations in its October 2015 response to the FSI.
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Increased ASIC funding
The Government announced that it will invest approximately $127 million to bolster ASIC’s powers. Of that amount, $61 million will be directed to modernising ASIC’s data management systems, and enhancing ASIC’s data analytics and surveillance capabilities. A further $57 million will enable increased surveillance and enforcement on an ongoing basis. The remaining $9 million will be delivered to ASIC and the Treasury to accelerate the implementation of regulatory reform.
Following the recommendations of the FSI, the Government will introduce an industry funding model for ASIC. It will commence in the second half of 2017. The model would require those that demand the highest level of regulation by ASIC, such as banks, to pay more to the regulator. The Government did not announce details of the model, stating that it will consult with industry to “refine and settle” the funding model.
An indication of the amount of the proposed fees can be gleaned from the Treasury’s 2015 consultation paper. It proposed that the scale of ASIC’s fees for Australian financial licensees be driven by the number of authorisations that each licensee holds and, for some authorised activities, the scale of those activities. For 2016-17, the proposed ASIC fees included up to $430,000 for bond underwriters/market makers; $260,000 for credit intermediaries; $206,000 for responsible entities; $202,000 for deposit issuers; $192,000 for credit providers; $137,000 for super trustees; and $470 for every tier 1 retail financial advice provider of the licensee. It was also proposed that those fees double in the following year. The Treasury paper did not include the increases in ASIC funding announced today by the Government.
Expanded powers of the Financial Ombudsman Service
The Government has asked ASIC to work with FOS to conduct an immediate review of FOS’s small business jurisdiction under its Terms of Reference. The Government has stated that there would be advantages in conducting a review of monetary limits and compensation caps, and in extending FOS’s current jurisdiction to include a wider range of small business loans.
The Government’s proposed additional ASIC powers are not new proposals but are significant. Increased ASIC funding has received a lot of media but the ASIC user pays model might surprise some industry participants.