Funding of ASIC’s insolvency regulation – what has the Attorney-General got to say?

Bills have been introduced into parliament to provide funding for ASIC’s regulation of the industries and professions it regulates.

In relation to corporate insolvency practitioners – call them liquidators – a proposal is on the table that would impose fees on liquidators themselves, consistent with the view that those regulated should fund the cost of their regulation.

Those producing this new law may not be aware but it seems to be happening in a law and policy vacuum. 

For the last several years the government has moved towards a supposedly harmonized regime for the regulation of insolvency practitioners.  This was after having rejected the recommendation of a single insolvency regulator in 2010.

The new harmonised law therefore has to accommodate having two separate types of practitioner – trustees and liquidators, the latter regulated by ASIC, under the Treasurer, the former regulated by AFSA, under the Attorney-General.

The law now works like this, that:

Insolvency practitioner A – a trustee in bankruptcy, regulated by AFSA, has to comply with bankruptcy laws that are harmonised with corporate;

Insolvency practitioner B – a liquidator, regulated by ASIC, has to comply with corporate insolvency laws that are harmonised with bankruptcy;

Insolvency practitioner C – a trustee in bankruptcy, regulated by AFSA, and a company liquidator regulated by ASIC, has to comply with bankruptcy laws that are harmonised with corporate, and corporate insolvency laws harmonised with bankruptcy. 

But regardless of what may be doubled up regulation, the new insolvency regime means that trustees and liquidators are regulated to the same law and standards, as to dealing with and reporting to creditors, holding meetings, voting, claiming remuneration, keeping accounts etc. 

The resource savings between AFSA and ASIC should be considerable.

Funding

AFSA has always been largely funded on a percentage of assets realised – presently 7% – and other fees and charges imposed in the conduct of bankruptcies.  

The government is now proposing ASIC be funded in a different way altogether.

That seems odd, after all this harmonisation push? 

The two regulators might not get on together and create extra costs; (the new law actually requires ASIC and AFSA “to co-operate” with each other, like school children – and it is evident which one was in the government’s mind when that requirement was included); but the government is now saying that, despite all this, the costs of ASIC’s regulation of liquidator Smith and of AFSA’s regulation of the same trustee Smith are so different that a separate funding regime is needed for ASIC.

Benchmarking?

ASIC and AFSA will not even be benchmarked, one against the other – how much AFSA spends on its regulation per trustee (say $x), how much ASIC spends (say $x+y, or it may be $x-y), both regulating the same laws. 

Other benchmarking options exist – if ASIC has failed to the extent that it has to take formal action against 10 liquidators per annum and AFSA one, it may indicate that AFSA has a more pro-active and technology based way of regulating that ASIC could emulate.  Or it could be the other way round….

There is also the sharing of resources and intelligence.

But where have the Attorney been and his department, and the Inspector-General in Bankruptcy, during this debate about insolvency funding?? They will have all the answers on AFSA’s costs of regulation per trustee – $x, and how these costs are recouped.

Those figures, offered me by AFSA, are in its costs recovery calculations on which the trustee profession is invited to participate. Any practitioner can examine AFSA’s Activity Based Costing Model which allocates its costs and derives fees and charges, online, through AER, and then track AFSA’s two broad costs allocations, its direct attributable costs for its Regulation and Enforcement (R&E) cost centres (see the 1 July 2015 Costs Recovery statement); and the indirect costs, according to its allocation methodologies.

We could then have Treasury disclose ASIC’s comparable methodology, or offer to have a forensics team do it for them.

There is time yet to do this.

 

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