AFS Licensees to fund ASIC User Pays Model

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wallet-1013789_1280With the Australian Federal Government due to reconvene at the end of August 2016, Australian Financial Services Licensees (AFS Licensees) will be waiting to see whether the new ASIC User Pays model will move forward.

The Australian Government has proposed to introduce an industry funding model for ASIC with an expected commencement date in the second half of 2017 (the model). The Government has not announced the details of the model, however, it has indicated that the model would require those that demand the highest level of regulation by ASIC to pay more to the regulator. The Treasury issued a consultation paper in August 2015 with the proposed industry funding model for ASIC.

Under the proposed model, the costs of ASIC’s regulatory activities will be structured in two categories:

  1. Annual Levies 

Under the proposed funding model, levies for AFS Licensees would equal the sum of:

  • a base levy of $250 for the licence itself and each authorisation held by an AFS licensee; and
  • additional levies for specific authorisations that the AFS Licensee holds – this intends to reflect ASIC’s supervisory costs for the services provided in relation to those authorisations.

The proposed additional levies for some of the authorisations are as follows:

Retail OTC Derivatives Issuers 

The levies for retail OTC derivatives issuers would be tiered based on the amount of net tangible assets (NTA) an entity is required to have under the financial requirements in ASIC Class Order [CO12/752] Financial requirements for retail OTC derivative issuers.

The proposed tiers are:

  • NTA greater than $1 million or entities that have applied for relief from NTA requirements – $95,000; and
  • NTA less than or equal to $1 million – $48,000.

Market Participants

The levies for market participants would equal to the sum of:

  • a fixed levy for all market participants – $15,000; and
  • a variable amount (payable only by participants in cash equity and futures markets) scaled relative to the proportion of transaction and message counts each entity places through ASIC’s market surveillance system – between $9 – $1.7 million, depending on proportion of total message count.

Deposit Product Providers

The levies for deposit product providers, under the proposed Model, would be tiered on the total value of deposit liabilities:

  • greater than $100 billion in deposit liabilities – $202,000;
  • greater than $10 billion in deposit liabilities – $76,000; and
  • less than $10 billion in deposit liabilities – $1,800;

Financial Advice Providers

The Model proposes to impose a flat levy on personal financial advice providers who are only authorised to provide advice on Tier 2 financial products.

Entities authorised to provide personal financial advice on Tier 1 products would be charged a base levy and an additional amount for each financial adviser that is registered on the Financial Advice Register (FAR):

  • Tier 1 Provider – fixed fee of $1,350 plus variable rate of $470 per adviser on FAR; or
  • Tier 2 Provider – fixed fee of $750

Margin Lender 

The Model proposed to impose a fixed annual fee of $6,400 on authorisations for margin lenders.

Risk Management Product Providers 

The Model proposed to impose a fixed annual fee of $6,400 on authorisations for risk management product providers.

  1. Fees-for-service 

The Model also proposes to impose an ex-ante fee for certain regulatory activities including but not limited to:

  • licensing and professional registration services;
  • process of application for relief lodged with ASIC; and
  • ASIC’s formal compliance review of documents lodged by entities.

Some examples of significant changes in fees for services are:

  • AFSL application fee – increase from $1,522 to $11,000;
  • AFSL variation application fee – increase from $255 to $6,900;
  • AFSL change of control form lodgment fee – increase from $0 to $4,400; and
  • ACL application fee (body corporate) – increase from $1,075 to $5,700.

We note that the Government will consult on the introduction of an industry funding model in line with best practice requirements. No final decision will be made until the consultation period and the ASIC Capability Review have concluded.

Feel free to contact us if you have any questions.

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Melody Gao

Melody assists in preparing, reviewing and negotiating legal documentation for participants in the financial services industry. Melody also assists with developing, reviewing and amending compliance documentation. She also supports the Compliance Consultants with the preparation of AFSL and ACL applications, variations and compliance reviews. Melody provides ongoing legal support and also assists in implementing ongoing compliance support, updating procedural documentation and preparing compliance reporting for Compliance Committees and Boards of Directors.

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