Industry Funding Model for ASIC

The Government has confirmed that it will introduce an industry funding (user pays) model for ASIC through a cost recovery levy, commencing 1 July 2017. What does this mean for licence holders? That there will be increased costs is definite, unless one decides to give up one’s licence.

Many AFS Licensees hold authorisations on their licence that were based on previous business models and should consider whether these authorisations continue to be necessary as they may impact the levies to be charged. Many licensees prefer to retain their licence authorisations in the event that they might require them. However, ASIC prefers that licensees remove the unnecessary authorisations to lessen their regulatory burden. The quantum of the increased costs may be lowered by either reducing the number of authorisations or changing the type of licence authorisations and the number of authorised representatives.

The ASIC Supervisory Cost Recovery Regulations 2017 apply either a flat or a graduated levy to entities in each industry subsector regulated by ASIC. The Regulations prescribe flat levies to apportion ASIC’s regulatory costs in subsectors where these costs are approximately the same for each entity. Graduated (variable) levies have also been prescribed for subsectors where ASIC’s regulatory costs vary significantly across its regulated population. Some of the graduated levies will include a fixed minimum component and a variable component to apportion ASIC’s regulatory costs. Others are based only a variable component depending on an entity’s share of the total activity in an industry subsector.

Flat rate levy

Flat rate levy will apply to areas of AFS Licensees such as:

custodians;
managed discretionary account providers;
traditional trustee company service providers;
wholesale electricity dealers;
licensees that provide only general advice to retail or wholesale clients;
licensees that provide personal advice to retail clients on products that are not relevant financial products; and
licensees that only provide personal advice to wholesale clients.

Credit rating agencies, retail over-the-counter derivatives issuers; small derivatives market operators and other market infrastructure and intermediaries will also be required to pay a flat rate levy.

Similarly, registered company auditors and large proprietary companies will also be subject to a flat rate levy.

Graduated levies

The Regulations propose graduated levies in addition to the flat levy. These graduated levies are aimed to cover ASIC’s surveillance and enforcement activities to regulate the various sectors. The proposed levies will impact companies and licensees depending the type of corporate entity, the structure of their business and the authorisations on their licence.

Examples of some of the levies to be imposed are:

Corporations – small companies

The Corporations (Fees) Regulations 2001 will be amended to increase the annual fee for proprietary companies to cover the cost of regulating them. For small proprietary companies, the regulatory burden will be lowered because they will only pay one fee each year instead of several types of lodgment fees.

Corporations – listed companies

Listed public companies will pay a minimum levy of $4,000 if they have a market capitalisation of under $5 million and $664,000 if they have a market capitalisation above $20 billion. Those listed public companies that have a market capitalisation between these two thresholds will pay the $4,000 minimum levy plus a variable component which depends on that company’s share of the total market capitalisation of listed public companies that is between the two thresholds.

Financial advisers

Licensees that provide personal advice on relevant financial products to retail clients will pay a minimum levy of $1,500. There is also an additional variable component depending on the total number of registered financial planners authorised to provide advice on the licensee’s behalf.

Investment management and superannuation

Responsible entities will pay a minimum levy of $7,000. Those that have more than $10 million in funds under management will also pay a variable component, depending on their share of the total funds under management in the subsector for the financial year, above the $10 million threshold.

Superannuation trustees will pay a minimum levy of $18,000. Superannuation trustees that have more than $250 million in funds under management will also pay a variable component depending on their share of the total funds under management in that subsector, that is above the threshold, for the financial year.

Wholesale trustees will pay a minimum levy of $1,000 and a graduated amount based on their share of the gross assets under management in the subsector for the financial year.

Credit providers

Credit providers will pay a minimum levy of $2,000. Credit providers that provide more than $100 million in credit contracts will also pay a variable component depending on their share of the total value of credit contracts above the $100 million threshold provided in a financial year.

Small amount credit providers would fall within the credit providers subsector and would pay the $2,000 minimum levy and variable component for that subsector. Small amount credit providers will also pay a variable component depending on each entity’s share of the total amount of credit provided under small amount credit contracts issued by the subsector in the financial year.

Credit intermediaries (brokers)

Credit intermediaries will have to pay a minimum levy of $1,000 and then a variable amount depending on the number of credit representatives each entity has.

Corporate Advisory

Corporate advisors will pay a minimum levy of $1,000. Corporate advisors that have more than $100,000 in revenue from the prescribed financial services will also pay a variable component depending on their share of the total revenue from corporate advisory activities above the $100,000 threshold for the subsector.

Futures markets

Futures participants will pay a minimum levy of $9,000 and an additional variable component depending on their share of the total number of messages and transactions reported on a large futures market and recognised by ASIC’s Market Surveillance System.

Want to know what to do? Our team of experts can assist you to review your business models and risk management to give you practical advice on your licensing requirements and licence authorisations. To enable you to focus on what you do best, we can help you to efficiently apply to ASIC to amend your licences and provide training to your staff following any licensing changes.