ASIC reduces broker levy after questions raised

The Australian Securities & Investments Commission (ASIC) has updated its draft cost recovery implementation statement (CRIS) for the financial year 2023–24, after its minimum levy for credit intermediaries was questioned by a member of industry.

On Monday (8 July), the Australian Securities & Investments Commission (ASIC) published its draft cost recovery implementation statement (CRIS) for FY23–24.

In its original document, ASIC outlined that it expected to recover $3.11 million from the 4,214 credit intermediary entities it regulates, which have 40,728 credit representatives working under them.

It outlined that credit intermediaries would be subject to a minimum levy of $1,000 for FY24.

However, Greg Ashe, the director of compliance specialists QED Risk Services, said that charging a minimum levy of $1,000 to each credit intermediary entity would have resulted in ASIC collecting more than $4.2 million, not $3.1 million, as listed.

Taking to The Adviser website earlier this week, Ashe said: “ASIC – this doesn’t make sense! Costs are $3.1 mil and there are 4,214 Licensees, all to be charged a base fee of $1000. So you’re going to charge $4.2 mil to cover $3.1 mil???

“Someone didn’t think this through…”

He therefore reached out to the regulator to question the figures.

ASIC acknowledged the error and has now updated the CRIS document.

Speaking to The Adviser, Ashe said: “This year, ASIC’s costs were only $3.1 million – but the CRIS still stated they were going to charge a base levy of $1,000 – meaning they would have charged $4.2 million to cover $3.1 million.

“When I challenged ASIC on this, this is the response I got: ‘There appears to have been a transposition error made in the CRIS document. The levy estimate within the CRIS should now be $737 for the Credit Intermediary subsector.’”

As such, Ashe said that he may have saved the industry $1.1 million.

However, the QED Risk Services director voiced dismay that the regulator had not owned its mistake openly.

He said: “A ‘transposition error’ is when you write 769 instead of 796. This was just a plain and simple oversight and they couldn’t be bothered owning up to it…

“A regulator with integrity would have said something like: ‘Of course, this is an oversight of unusual circumstances and the usual, legislated, base Levy will need to be reduced for this year. We apologise for the mistake.’

“Plain, old dishonesty. I expect better of our regulator.”

ASIC's response

The Adviser reached out to ASIC for a comment on the levy estimate error and was told that the issue arose because Regulation 25 of ASIC Supervisory Cost Recovery Levy Regulations 2017 states that the minimum levy component for the sub-sector is $1,000.

The spokesperson told The Adviser: "While $1,000 is the minimum levy set by the Regulations, where our actual costs will result in a levy that is less than $1,000 per licensee, the levy amounts recovered would be adjusted to avoid an over-recovery.

"Given we received a query on it, we considered it prudent to change it as there are a large number of participants in the subsector and we wanted to avoid any potential for further confusion.

"To confirm, we never over-recover our regulatory costs for any subsector under ASIC industry funding," the ASIC spokesperson added.

ASIC under the pump

The levy confusion comes amid calls for widespread reform at ASIC and concerns that it is overstretched.

Last week, a scathing Senate economic references committee report put forward recommendations to change the financial services regulator, with the chair of the committee, senator Andrew Bragg, saying: “Over the last 20 months, the Committee has uncovered the dire state of ASIC: an organisation without transparency, few prosecutions, and a litany of cultural, structural and governance issues.

“It is clear ASIC has failed.”

One of the recommendations put forward included changing the way ASIC is funded.

Specifically, the report recommended taking “reasonable steps” to ensure levies charged on industry subsectors are reduced (commensurate with increased resourcing to the regulator through the proceeds of fines).

Instead, it advised that the government “reassess” ASIC’s funding arrangements so that a greater level of funding can be directly resourced with the proceeds of regulatory fines (including late fees, court fines, penalties, and infringement notices).

It also advised ensuring that regulatory authorities are accountable for the level of resources linked to cost-recovered activity and face obligations to rationalise surplus resourcing to reduce costs on the industry subsector participants.

When releasing the report last week, the chairperson of the committee, Senator Bragg, said: “The Committee understands the pressure of ASIC levies on small business. We have recommended lightening the load on small business by recalibrating the funding model.

“We need regulators to be responsive and transparent, but most of all to be focused on enforcement.

“These measures, if adopted, would provide Australians with the protection and confidence which is sadly absent.”

You can find out more about the ASIC report, the suggested recommendations, and thoughts on changing the industry funding model in The Adviser’s What’s Making Headlines podcast below:

[Related: Industry to pay $3.11m in ASIC levies for FY24]

Written by Annie Kane

Last Updated: 12 July 2024

Published: 12 July 2024