ASIC’s industry funding model – draft laws

Drafts of ASIC’s Supervisory Cost Recovery Levy Bill 2017 and related Bills have been released for comment, by 10 March 2017.  Under these Bills, the levying of the costs of regulation of insolvency practitioners would now come under two different funding models, contrary to the new harmonized approach to insolvency, commencing next week, 1 March 2017.

Treasury has released draft laws to introduce an industry funding model for ASIC, commencing in the second half of 2017.

These laws are intended to recover ASIC’s regulatory costs though annual levies and fees-for-service. There are three draft Bills for consideration, the:

  • ASIC Supervisory Cost Recovery Levy Bill 2017;
  • ASIC Supervisory Cost Recovery Levy (Collection) Bill 2017;
  • ASIC Supervisory Cost Recovery Levy (Consequential and Transitional) Bill 2017; as well as
  • accompanying explanatory materials.

Draft regulations have not yet been released.  The government says it is continuing to consult on the mechanisms that will be used to calculate the levies payable by each class of regulated entity, with this detail to be included in draft regulations.

The submission process on the draft Bills and the explanatory materials will close soon, on Friday, 10 March 2017.

Additional public consultation will be held on the regulations necessary to support the model.

Comment

The approach taken represents the typical and well known silo approach of government, resulting in disparate entities and individuals being subject to the one levy regime simply because they happen to fall within the grab-bag of entities and individuals regulated by ASIC.

This is acknowledged in the explanatory statement, that “because of the diversity of entities and activities that ASIC regulates, and how this can change over time, there is a need to have a degree of flexibility in the methodologies that are used to apportion ASIC’s costs, so that they can change when circumstances change and remain consistent with the objectives”.  It refers to the 40 plus different methods for apportioning ASIC’s regulatory costs otherwise needed.

Insolvency practitioners

In the context of insolvency practitioners, on the one hand we have a group coming under one regulator, AFSA, which operates under full costs recovery by way of a levy on assets, with a surplus generated each year; and on the other hand, we have largely the same group and more, under another regulator, ASIC, which will be imposing its regulatory levy not on assets, but on the practitioners themselves.

This is despite the government’s new harmonised approach to insolvency and the regulation of insolvency practitioners under the reforms commencing next week, on 1 March 2017. 

These Bills do not seem to acknowledge those impending changes. Their definition of a “liquidator entity” means, inter alia, “a registered liquidator (within the meaning of the Corporations Act 2001)” or “a person registered as a liquidator of a company under subsection 1282(3) of the Corporations Act …”. Section 1282 is repealed as of 1 March 2017, and ‘registered liquidator’ now has a different meaning under the Corporations Schedule. 

(As to harmonisation, nothing much should be read into the reference in the explanatory statement to the suspension of a liquidator’s registration by the Inspector-General (in Bankruptcy) under section 40-25 of the Corporations Schedule). 

No doubt those drafting problems will be addressed.

Australian Government Charging Framework and the Cost Recovery Guidelines

The government says it has developed the funding model in accordance with this Framework and Recovery Guidelines. 

This is the approach also taken by AFSA on which it consults the profession each year when its levies are to be raised or lowered. In 2015–16, AFSA reported a departmental operating surplus of $11.84 million and conducts its regulation with attention to the regulatory burden on trustees and to risk-based and proportionate approaches to regulation. Specific performance metrics for its regulatory framework applying to the regulation of personal insolvency practitioners have been developed. AFSA has separate funding arrangements for its proceeds of crime, personal property securities and its general Commonwealth trustee work.

Treasury and AGD

We may take some comfort that the legislation is being handled by Treasury which, with its economic and financial accountability focus, will ensure that ASIC’s claimed costs are necessary and properly calculated, and are in parity with comparable regulators here and internationally. There could not be a suggestion in the law that it will be ASIC determining its own costs, and efficiencies.  No doubt AGD and AFSA will also be offering their input.

ASIC’s accountability

ASIC will be required to publish its total regulatory costs in relation to leviable entities, and how it has apportioned those costs across each sector and sub-sector.  In relation to each sector, ASIC will also be required to explain how it has apportioned its costs by reference to the types of activities undertaken, and the different kinds of expenses incurred by ASIC in the financial year. 

Similarly, new section 136(1)(ca) of the ASIC Act will require ASIC to provide in its annual report “information about the activities that ASIC has undertaken during the period in exercise of its powers, and performance of its functions” under the new insolvency laws. 

The two reports will provide a useful comparison.

Photo: London hotel

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