ASIC commissioners blamed the “mechanical” industry funding model, combined with the fallout of the Hayne Royal Commission and a declining adviser base for the stark increase in the adviser annual levy this year.
Speaking at a Senate Economics Legislation Committee hearing this morning, ASIC chair James Shipton answered a question from ALP Senator Jenny McAllister about whether ASIC would need to increase the funding levy even further to accommodate extra resources required for the code monitoring role it’s slated to absorb once FASEA is dissolved.
“The way the industry funding works is [that] it’s very mechanical. If our costs increase then it has to be allocated across the various different subsectors and populations,” Shipton said. “It’s just a mechanical response.”
The latest adviser levy for FY19/20 came in at $1500 per licensee plus $2,426 per adviser – an increase of 160 per cent in two years.
“Unfortunately the way the model works is that it’s very difficult to carve one piece out to another,” added Commissioner Danielle Press. “We are very cognisant of the issue but the industry funding model is mechanical and there’s very little flexibility in what we can do.”
Press spoke of the “lag effect” of the industry funding model and revealed the regulator has been talking to industry bodies about the levy. She also repeated ASIC’s explanation at the Parliamentary Joint Committee recently that other factors increased the levy; a “numerator” effect due to enforcement of the Hayne Royal Commission and the “denominator” effect of declining adviser numbers.
“Those two things have hit together,” she said.
Deputy Chair Karen Chester did note that the “pipeline” of these costs is expected to come off “very heavily, very shortly” as the regulator is almost at the end of its royal commission enforcement regime.
“ASIC is now putting in place arrangements to review express investigation with corporate entities such that we will be looking to reduce the cost of enforcement both with ASIC and of course with entities, and that’s been the biggest driver of our cost increase over the past two to three years,” Chester added.