The ASIC Supervisory Cost Recovery Levy Bill 2017 and the ASIC Supervisory Cost Recovery (Collection) Act 2017 came into effect 1 July 2017 and essentially changed the method in which ASIC will be funded. The legislative changes will allow ASIC to better focus its resources on the sectors that require the most attention and regulation. This further incentivises industries to self regulate so that where a sector has instances of misconduct, ASIC will intervene and increase the costs charged to that sector. It also means that the funding required for an industry is met by the sector requiring the regulation i.e. under an “industry pays” model, rather than the Australian taxpayer.
Going forward, regulated entities will receive an invoice for ASIC’s regulatory services delivered in the previous financial year. Regulated entities are now grouped into 6 sectors and 48 subsectors across all corporates (subject to the Corporations Act (Cth) 2001 (Corporations Act), auditors, insolvency, practitioners, credit licensees, Australian Financial Service licensees and other regulated entities and individuals.
There will be an allocation of ASIC’s regulatory costs among these subsectors either as a flat levy or a graduated levy. Note, a flat levy is where the cost of regulating a particular subsector is to be borne equally among the entities operating within that subsector and a graduated levy is to be paid by an entity dependant on its size or the level of its business activity. Where an entity holds more than one licence or registration, the levy applicable for each subsector it falls within, will be payable.
The new industry funding model is designed to recover the actual amount spent during the previous financial year and therefore levies will only be calculated and issued in the following financial year. Essentially, the cost of ASIC’s work in each subsector will be forecast in its annual Cost Recovery Implementation Statement (CRIS) which will be published each year providing an indication as to the expected expenditure on its regulatory activities. The CRIS is an essential component of ASIC’s accountability to Government and industry in relation to the transparency of ASIC’s costs. The CRIS will only provide indicative figures and where possible, ASIC will publish the indicative levies in advance for each subsector. Recently, ASIC provided a summary of its indicative levies for the FY2017-2018 period – see here. However, note there are subsectors for which ASIC is currently unable to issue indicative levies for since the required information is not currently collected by ASIC. These subsectors include (but are not limited to) credit providers, responsible entities, OTC traders, superannuation trustees, wholesale trustees, corporate advisers, insurance product providers, deposit product providers, wholesale electricity dealers and financial adviser licensees authorised to provide advice on relevant financial products to retail clients.
Fees for service
While around 90% of ASIC’s regulatory activities will be recovered through the industry funding model, the remaining 10% will be recovered through fees for service i.e. those regulatory costs attributable to a single entity. Fees for service will apply to licensing and professional registration services, processing of relief applications and ASIC’s formal compliance review of documents lodged by entities under the Corporations Act.
Important upcoming dates
As of 1 July 2018, all proprietary companies will face an annual review increase by approximately $4 and as of 4 July 2018, the new fee-for-service charges have commenced. During the period from July to September 2018, regulated entities will have to submit a return about their operations for the FY2017-2018 period. By October 2018, the Budget FY2018-2019 leviable costs by subsector will be published in CRIS. In January 2019, ASIC will issue its first levy invoices to industry for the previous financial year and these must be paid by February 2019 or incur interest penalties which will be enforced by ASIC in March 2019.
Financial advice sector levy changes
AFS licensees that are authorised to provide advice on relevant products are now introduced with a fixed levy of $1,500. The graduated levy for these licensees is based on the number of advisers the relevant licensee has on the Financial Advisers Register however, with respect to securities dealers, large securities exchange participants and large futures exchange participants, this excludes consideration of the number of advisers who provide advice on quoted products, products traded on a foreign financial market or basic banking products.
For an outline of the 2017-2018 cost recovery arrangements (i.e. calculation for levies) for the sectors affected, see the Appendix in Report 535 ASIC cost recovery arrangements: 2017-2018 here.
For further information on what your organisation needs to do and pay, levy types, key dates and the sub-sectors that attract both flat and graduated levies, see the link for ASIC’s industry funding here.