ASIC has recommended the introduction of a ‘user pays’ funding model as the revenue collected by Government from the new sectors under the regulator’s jurisdiction is “increasingly misaligned”.
The regulator says the cost currently imposed on the regulated population do not accurately reflect the costs of regulation.
In its submission to the Financial System inquiry, it recommends moving to a user pays funding model whereby costs are recovered specifically from those who engage in regulated activities and those who benefit from a well-regulated market and financial system.
Stakeholders engaged in those regulated activities would be charged the fee each time the service was required.
All costs not recovered by fees would be aggregated at the stakeholder-group level, and would form the basis of levies charged to external stakeholder groups on an industry basis. The levies would cover the costs of regulatory activities that generally relate to those groups, but not to individual entities.
It said: “At present, the populations ASIC regulates are not charged in proportion with the benefits they receive from our regulation.
“At present, there are also no economic incentives (price signals) in the market for the use of ASIC’s resources. Stakeholders acting rationally will seek to efficiently allocate their own resources and may choose low- cost or no cost ASIC services over other, more costly, alternatives available in the market (e.g. private legal advice).”
It says price signals associated with the use of ASIC’s resources would allow business to identify the cost of regulation required to achieve the desired regulatory outcome.
ASIC also proposed changes to improve the standards in financial advice, as “there are still some regulatory gaps” over and above the Future of Financial Advice (FOFA) reforms that effect public perception and reduce ASIC’s ability to fulfil its mandate of promoting confidence in the financial system.
It suggested introducing a national exam for advisers before being able to give personal advice on Tier 1 products, a requirement for mandatory reference-checking before being able to give personal advice on Tier 1 products, an employee adviser register, and allowing ASIC to ban a person from managing financial services business or credit business.
In addition, the regulator suggested the need for a review of penalties under ASIC –administered legislation and the introduction of a competition objective to enable it to consider market-wide effects more explicitly and select the most ‘competition -friendly’ option.
The submission can be read
here.
