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The role of ASIC - is it revenue or enforcement?

THERE appears to be a disconnect between ASIC’s ability to raise revenue for government coffers and its capacity to do its actual job; that of regulation and enforcement, according to the Institute of Public Accountants (IPA). 

“The IPA has long advocated for ASIC to be appropriately resourced to do its job,” said IPA chief executive officer, Andrew Conway.

“However, it would appear that ASIC is doing a much better job of raising revenue for government than what it is doing in terms of enforcement.

In its submission to the Treasury in December 2017 on the ASIC fees-for-service industry funding model, the IPA noted that the consultation paper referred to the government’s ‘Charging Framework’ which requires an alignment between the expenses of the regulatory activity and the revenue; and which states that there must not be systematic over- or under-recovery of costs over time.  

In 2016-17 ASIC raised $920.24 million for the Commonwealth in fees and charges, an increase of 5% from the previous year.  (Annual Report 2016-17, p26).  

Also in 2016-17, ASIC received approximately $349 million in appropriation revenue.  ASIC’s expenses were $392.46 million, leaving a deficit of over $43.5 million (Annual Report 2016-17 p26). 

“In other words, even though ASIC is making significant income for government, it is not even able to cover its own costs from the budget it receives from government," Mr Conway said. " This also means that ASIC is raising substantially more revenue than its operational costs, which appears to go against the government’s own Charging Framework. . 

“In order to justify the huge increase in proposed fees for industry then government would need to make the case that the genuine operational costs (as indicated by a fees-for-service model) are much higher than the current stated operational costs.  This is simply not the case.      

 “If the aim of the game is revenue, it may explain why ASIC sought a proposed one-off fee increase from $107 to $3,429 for new auditors of SMSFs, which we argued was exorbitant.  

“While the new proposed fee has been reduced to $1,927, it is still far too high and will only deter new entrants into the SMSF auditor market, which is already in decline.

“Not only is ASIC overcharging, but the government is double-dipping. The ATO currently already collects $259 from each SMSF to finance the SMSF monitoring role the ATO conducts on behalf of ASIC. Whilst this levy was a mere $45 in 2008 it now equates to approximately $142.5million to monitor the sector including SMSF auditors.

“We have a much bigger concern if a new funding model is only focused on government revenue without equipping the corporate regulator to do its job adequately,” said Mr Conway.

www.publicaccountants.org.au

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Consultation on ASIC industry funding levy amendments ends May 14

THE FEDERAL Government has announced as part of its commitment to improving consumer outcomes in the financial services sector it will consult business leaders and the public on the Australian Securities and Investment Commission (ASIC) industry funding model.

Federal Revenue and Financial Services Minister Kelly O'Dwyer said an ASIC industry funding model was an important element in the government’s plan to deliver on this commitment.

She said under the ASIC Industry Funding Model, the costs of regulation are borne by those that have created the need for it, rather than the Australian public.

"Industry funding increases transparency, makes industry more accountable for its behaviour and makes ASIC a stronger regulator," Ms O'Dwyer said.

"The industry funding model delivers on a key recommendation of the 2014 Murray Financial System Inquiry, as well as the 2013 Senate Inquiry into ASIC’s performance.

"The first phase of industry funding commenced on 1 July 2017 with the introduction of industry levies."

The government last week released draft regulations to make technical amendments to the levies in the industry funding framework to ensure they operate as intended. The amendments include:

  • Establishing new industry subsectors to reflect the recently introduced licencing schemes for crowd‑sourced funding intermediaries and financial benchmark administrators;
  • Creating separate industry subsectors for small and large credit rating agencies; and
  • Simplifying the operation of the large securities exchange participants industry subsector.

Comments on the draft Regulations close on May 14, 2018.

"The Government appreciates industry’s continued engagement throughout the development of the industry funding model and stakeholders are invited to provide their feedback on the draft regulations on the Treasury website."

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Inquiry into the competitive neutrality of the national broadcasters

AN EXPERT panel is examining whether our national broadcasters are operating in a manner consistent with the general principles of competitive neutrality.

On March 29, 2018, the Australian Government launched an inquiry into Australia’s national broadcasters to examine whether they are operating in line with competitive neutrality principles.

Competitive neutrality principles provide that government businesses should not have a competitive advantage over any other market participant, simply by virtue of their public sector ownership.

Media landscapes across the globe are changing at a rapid pace and Australia is no exception. Organisations are experiencing a shift in challenges and opportunities, and are adapting to new consumer and market trends.

This, combined with changes in technology and the rise of new market entrants, has significantly impacted the environment in which our national broadcasters, the ABC and SBS, operate. Within this context, it is timely to consider the competitive neutrality of our national broadcasters.

An expert panel has been appointed by the Government to conduct the inquiry and consult relevant stakeholders. The Panel is being supported by a taskforce within the Department of Communications and the Arts.

Find out more about the inquiry and how to Have Your Say.

www.communications.gov.au

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First Super supports ACSI action against AMP board, will vote shares accordingly

INDUSTRY superannuation fund First Super welcomed the decision by the Australian Council of Superannuation investors (ACSI) to formally recommend investors in AMP vote against the re-election of directors at the upcoming AMP AGM.

Commenting on the decision, First Super CEO Bill Watson urged other institutional investors to also follow the ACSI voting recommendation.

“We call on other superannuation funds, fund managers and proxy advisers to follow the lead of ACSI and send a message to the industry that the types of practices perpetrated by AMP and recently uncovered by the Royal Commission are unacceptable," Mr Watson said.

“First Super will vote its shares against the re-election of the three directors and calls on the rest of the board to seriously consider their individual and collective positions.”

Mr Watson said it was imperative the AMP board investigate and action how to recover bonuses paid to executives who presided over and permitted practices for which the board has now acknowledged and apologised for.

“The actions of AMP management and the atrocious governance failings that have recently come to light has had real world consequences for millions of hard working Australians. Shareholder value has been destroyed with the share price down 20 percent in the last month," he said.

“News today that the Counsel Assisting the Royal Commission submitting that is open to the Royal Commission to recommend criminal charges against AMP is yet another indication of distressing and unsustainable problems at that firm. 

“From an investor perspective the situation is profoundly disappointing and we need to see some accountability and reckoning.”

www.firstsuper.com.au

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For the future’s sake - Safe Work Australia

SAFE Work Australia Chief Executive Officer, Michelle Baxter, says the death of fourteen young people in work-related incidents is too many and urges leaders to educate young workers about work health and safety (WHS).

World Day for Safety and Health at Work and Workers’ Memorial Day (Saturday 28th April) is a time to focus on work health and safety, and to honour the memory of those who have died from a work-related injury or illness.

“Fourteen young workers* were killed in work-related incidents in 2016, which is fourteen workers too many,” said Ms Baxter.

“Young workers have an increased risk of workplace injury due to lack of experience, maturity and awareness of WHS responsibilities, so we must focus on building safe and healthy workplaces for this vulnerable group.

“I can’t overstate the important role of employers, employees and business leaders in educating young workers about their WHS rights and responsibilities, providing the right tools and in ensuring they feel empowered to speak up about safety and health.

“Our young workers’ web page, launched for World Day, provides easy access to resources and toolkits to help both young workers and their employers create safe and healthy workplaces,” said Ms Baxter.

To access the young workers’ web page and find out how you and your workplace can get involved in World Day, visit safeworkaustralia.gov.au/worldday

*(aged 15 to 24 years)

 

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