The Australian Securities and Investment Commission has had its budget reduced by over seven per cent and will be asked to shed a corresponding ten per cent of its staff as a raft of changes to its job suite begin to shift the regulator’s purview.
While the money flowed as part of a budget aimed at securing Australia’s recovery, ASIC’s budget will drop from $772 million to $717 million in 2021-22, while its staff will drop from 2,096 to 1,878.
Ostensibly, the cutbacks are a natural follow-on from the government’s 2020 Budget Digital Business Plan, which will see ASIC’s business registration function transferred to the new Australian Business Registry Services (ABRS) under the Australian Tax Office.
Corresponding ASIC staff were scheduled to start transferring to the ATO in mid-April, with the end-to-end transfer of responsibilities slated to finish in 2024.
Yet the shift in business registry functions and the attendant cutbacks reflect a broader trend; the regulatory body for AFSLs is in a state of flux, especially from an advice perspective.
Draft regulation released in April will see ASIC’s Financial Services and Credit Panel take over the disciplinary function for advisers from the Financial Advisers Standards and Ethics Authority in 2022, yet responsibilities tied to FASEA’s ethics and education settings will go to Treasury.
The Australian Law Reform Commission is also knee-deep into its review of financial services regulation, with financial advice taking a “certain prominence” according to ALRC special counsel Andrew Godwin.
Godwin’s view that chapter seven of the Corporation’s Act is “an accumulation of amendments, revisions, modifications and what-have-you,” is part of the reason many believe the ALRC will do something drastic with this central piece of advice regulation.
A further change to ASIC’s purview could be if its funding cut takes momentum out of the ‘why not litigate?‘ stance.
This would be “problematic” according to UNSW law lecturer Marina Nehme, who completed her doctorate on ASIC enforcement strategy. “People are still waiting to see enforcement from the royal commission,” she says. “Taking even $1 of funding is problematic.”
“There are a lot of changes with ASIC at the moment,” Nehme adds. “It’s important for the government to find the balance to empower ASIC to take action when needed but also to collaborate and work with other entities when possible.”
Shifting footing
The changes around ASIC don’t necessarily point to its marginalisation.
As part of his budget announcements the Treasurer made a point of highlighting the vital role ASIC will play in the post-Covid economic recovery.
The government last January introduced reforms t0 improve ASIC’s strength in regulating super and increase its consumer protection powers. ASIC’s supervisory and licensing power will also be heightened this year with the introduction of the Financial Markets Infrastructures (FMIs) reform package, which will eventually give regulators more power to pre-empt and intervene on identified risks.
A degree of expansion and contraction is natural for ASIC, too, as a good portion of its work (sources estimate 20 per cent) is project-based and thus variable.
After the expenses scandal that led to the resignations of its chair James Shipton and deputy chair Daniel Crennan, newly named chair Joe Longo will take the reigns at ASIC in early June.
He’ll do so knowing ASIC’s purpose has not changed, nor has its importance diminished; it still exists to regulate financial services and enforce laws to protect Australian consumers, investors and creditors.
Yet from an advice regulation perspective, especially, ASIC’s footing is shifting.
