The financial advice sector has become a key funder of the enforcement activities of the Australian Securities and Investments Commission (ASIC) despite no proceeds from successful actions being used to fund the ongoing work of the regulator, the Financial Advice Association Australia (FAAA) has claimed.
The representative body for financial advice practitioners made the assertion in its pre-budget submission, in which it noted the corporate regulator and government benefit from “cost-free enforcement actions”.
“Under the current funding model, all costs of ASIC enforcement actions, whether successful or not, are funded by industry. Proceeds from successful enforcement should offset costs before compliant businesses are charged, rather than going into consolidated revenue,” the submission stated.
Addressing this issue during a media briefing yesterday, FAAA chief executive Sarah Abood said the issue of what happens to enforcement proceeds was important, adding that in the past multi-million-dollar fines from banks related to financial advice went into the government’s coffers.
“Where is that going? It just goes into general revenue for the government and we know it’s not targeted at paying for anything in particular,” Abood added.
“This is our argument that it should be targeted at improvements to the sector itself, covering the cost of ASIC and covering the costs of preventing future collapses and future problems.”
She also took aim at the rising level of the ASIC adviser levy and noted while it had increased only slightly in the past year, it was still too high and advice practitioners were being forced to pay for matters outside their control.
“The way the levy is allocated is ASIC looks at its enforcement costs and allocates them to sectors, and then the proportion of total enforcement activity that you are responsible for is the proportion of ASIC’s total costs that you bear,” she added.
“This means we are paying for a very large share of the fixed costs of running the regulator itself so that’s clearly inappropriate for a sector like ours, and ASIC being much clearer and more transparent about how it allocates its enforcement activities and the costs of those is really important.
“In my first year in this role, the financial advice sector paid by far the largest share of the costs of ASIC. How crazy is it that a bunch of small businesses were paying more than listed investment companies and more than super funds?
“The general principle is that we shouldn’t be running the corporate cop as a revenue generator for government. That shouldn’t be the positioning of the organisation that needs to keep the sector honest.”
