Date posted: 9/04/2018 3 min read

ASIC Supervisory Cost Recovery Model

How ASIC’s new industry funding model will impact its regulated population

In brief

  • From 1 July 2017, all ASIC regulated entities have to cover a portion of ASIC’s costs
  • ASIC’s costs, and therefore the levies, are yet to be determined
  • The first invoices will be issued in January 2019 for the 2017/18 financial year

The ASIC Supervisory Cost Recovery Levy Act and related regulations were finalised at the end of June 2017. From 1 July, all ASIC regulated entities have to cover a portion of ASIC’s costs, so that the costs of regulation are paid by those being regulated. Understandably this approach is not a popular one, but it is not uncommon. A number of other jurisdictions, including the UK, New Zealand and the United States, use an industry funding model (IFM) for financial markets regulators.

We have been actively involved in the consultation process in relation to the IFM and raised a number of critical issues. These issues included recommending an IFM is not introduced until ASIC’s performance framework review has been completed, that the disproportionate burden on smaller practitioners is considered and that alternative funding models, such as part funding by the government, were explored.

The regulations

ASIC Supervisory Cost Recovery Levy Regulations 2017

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How are costs allocated?

Regulated entities have been split into 48 sub-sectors across Corporations, Auditors, Insolvency Practitioners, AFS Licensees and other regulated entities and individuals.  ASIC’s costs will be allocated between the sub-sectors. The levy calculation methods are unique to each sub-sector. Each sub-sector will pay a unique mix of flat and variable levies, and some sub-sectors have both minimum and capped levies. 

Can I budget for this?

ASIC have consulted on a draft Cost Recovery Implementation Statement (CRIS) and their estimated regulatory costs for each sub-sector in October 2017. They are expected to issue a final CRIS which aims to forecast the costs associated with ASIC's work shortly. The CRIS will be updated each year. In March 2018 ASIC published Report 570 Indicative levies for ASIC industry funding: 2017-218 which details indicative levies for many sub-sectors. The report does not cover all sub-sectors as ASIC does not yet have all the necessary industry metrics. If you fall into more than one sub-sector, the levy for each sub-sector is payable - no cross subsidy is permitted.

When do I pay?

All regulated entities will be required to complete an annual return by 31 October 2018 detailing their relevant activity for the year to 30 June 2018. ASIC will calculate levies based on their costs and the data provided in those annual returns. The first invoices will be issued in January 2019 and will cover the regulatory services cost for the 2017/18 financial year. Any over or under spend against budget will be collected from levies in the subsequent year.

Is there any more help?

At first glance this may all seem confusing. We have developed a guidance paper (see below) that sets out the levy calculation methods for each sub-sector. It also includes the estimated ASIC cost to be recovered from each sub-sector based on information which has been included in various parts of the consultation.

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