The Beginning of a New Era in ASIC’s Regulatory Regime

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The Australian Government passed the Supervisory Cost Recovery Levy Bill 2017 and related bills on 16 June 2017, a regulatory milestone for the Australian Securities and Investments Commission (ASIC) which introduces the Industry Funding Model (Model) discussed in our article “Industry Funding Model for ASIC Moving Closer” published in February of this year.

The Model backed by the Acts will kick start on 1 July 2017, however those affected will not receive their first invoice until late 2018 at the earliest.

The main idea behind the Model by the Australian Government is that industry participants who create the need for and benefit from ASIC Regulation will bear the costs incurred to supervise the industry. The Model provides an economic incentive for ASIC to drive desired regulatory outcomes in the Australian financial market. Under the Model, ASIC’s regulatory costs for a particular financial year will be recovered in the form of annual levies from all entities regulated by ASIC during the relevant financial year. However, the levy will be calculated and payable in the following financial year after ASIC issues the leviable entity with a notice setting out their liability. The Australian Government believes that this will increase ASIC’s accountability and create a rich dataset to help ASIC prioritise its resources. In the coming years, ASIC will provide an annual report on its regulatory priorities, the means by which it intends to address those priorities and the allocation of resources to each regulatory activity.

The Model is anticipated to increase regulatory costs by $21.1 million per year, but this figure is likely to change once refinements are made to the proposed levy mechanisms for each industry subsector. To implement the Model, around 7,500 ASIC regulated entities will have to establish new reporting systems to provide ASIC with any additional data requested by ASIC in relation to the operation of the entities and around 55,000 ASIC regulated entities will have to provide additional data to ASIC each year. While this enforcement has a cost to its industry participants, on the bright side, it will bring significant benefits for the entities as the additional data will allow ASIC to better identify and respond to emerging risks in the financial sector, and apportion its regulatory costs across regulated entities according to their regulatory activities and thus eliminating or significantly minimising cross-subsidisation. Furthermore, the annual regulatory burden is expected to be reduced once the industry’s data reporting systems are in place and ASIC is able to pre-populate forms based on prior-year returns and other data collection mechanisms.

The Minister for Revenue and Financial Services, Kelly O’Dwyer, stated in her media release on 15 June 2016 that the regulations to provide further details on the operation of the Model will be made shortly before the commencement of the Model on 1 July 2017.

If your entity is currently regulated by ASIC, this coming financial year 2017- 2018 will be the first year that the Australian Government will recover ASIC’s regulatory costs from financial services participants making them liable for the levies issued in the following financial year (2018-2019).

For more information, please refer to 17-186 ASIC Media Release and article titled Industry Funding Model for ASIC Moving Closer for background information.

For information on the Acts please see the below links:

ASIC Supervisory Cost Recovery Levy Act 2017

ASIC Supervisory Cost Recovery Levy (Collection) Act 2017

ASIC Supervisory Cost Recovery Levy (Consequential Amendments) Act 2017

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