A review of ASIC’s cost recovery mechanisms has recommended the advice profession remain on the hook for impropriety by unlicensed providers, but argues advisers are the beneficiaries of this enforcement.
The findings of the Treasury review come with the Minister for Financial Services Stephen Jones confirming the end of the ASIC levy freeze for advisers.
“If ASIC takes enforcement action against an unlicensed individual providing personal advice to retail clients on relevant financial products, this benefits the financial advice sector as a whole,” the review said.
“Consumers do not generally differentiate between the different types of financial advice being provided, just that unlicensed financial advice is being provided and should be prevented.”
If the levy had not been frozen in 2021, the report said the cost recovery per adviser would have been $2971 in FY21 and $3021 in FY22, plus the $1500 flat fee.
The report found in FY22, enforcement related to unlicensed conduct represented approximately 15 per cent of ASIC’s total enforcement costs.
Just under a third of that 15 per cent related to unlicensed conduct that was recovered from the personal financial advice licensee sub-sector and 25 per cent related to unlicensed conduct that was recovered from the over-the-counter derivative issuers sub-sector.
In the interest of time
When it comes to the nuance of how enforcement costs might be allocated in a situation where multiple sub-sectors are involved, the report said the current approach of using a time management system remains “appropriate”.
“Based on findings from a 2021 pilot study, any further disaggregation would be administratively burdensome and costly for ASIC to administer and would not have any significant impacts on levy distribution and size,” the review said.
The official recommendation was to spread the recovery of regulatory costs based on ASIC’s total regulatory effort for each sub-sector.
“For example, ASIC investigates a matter relating to an individual who is suspected of providing unlicensed personal financial advice to retail clients as well as suspected unlicensed dealing of general insurance products,” the review said.
“In this scenario, if ASIC staff spend 30 per cent of its time on the matter investigating the financial advice aspect and 70 per cent of its time investigating the insurance aspect, the costs of the matter would be recovered proportionally from the relevant sub-sectors – 30 per cent from the personal financial advice licensee sub-sector and 70 per cent from the insurance product provider sub-sector.”
