The current status of Treasury’s Funding of ASIC back to industry remains in ongoing discussions with Treasury and key profile industry stakeholders regarding the proposed funding model for the Australian Securities and Investments Commission (ASIC).
Under its second proposed funding model delivered to industry last month, Treasury wants Australian Credit Licensees (ACL) to pay a yearly base fee of $1000 and for those ACL-holding intermediaries (brokers), an additional levy of $1.14 for every extra $10,000 they write above a $100 million threshold is also proposed. There are many questions need to be asked about this model and most cannot be answered at this stage because of the limited data available. It is important to note this replaces the current annual credit licence renewal fee and is not and additional levy or tax, albeit it will cost more to renew a licence in the future but that cannot be changed. If ASIC’s recovery costs reduce in the future, so will this fee and conversely so is the opposite if their recovery costs go up.
From what we know at this stage is that this proposed model will not deliver a fair and equitable outcome. At the last critical meeting in November with Treasury, where the FBAA was the sole association representing brokers, we were advised that the maximum that ASIC can recover is $15.8 million. So there are too many unknowns to support the proposed model and ACL’s would end up paying much more of the $15.8 million needed to fund ASIC’s Cost of Recovery.
Another critical factor to consider is that the $1.14 levy could seriously erode the financial viability of smaller ACL holders, who could fragment to ensure they remain under the $100 million threshold and not be liable for higher costs. Plus it is also important to note that the $1.14 levy could be as little as 5 cents but more data is needed to make this determination, which the FBAA has called for.
Separately an unintended risk of the wrong model being established is that these fees could also create entry barriers, increasing the risk of driving ACL holders back to being credit representatives. The effect of which could shrink the pool of licences from which to recover costs, leaving a bigger burden on those who remain.
There are additional costs being proposed which are also unfair according to FBAA. Treasury have embedded in the model for us to pay for the cost of financial literacy which really has nothing at all to do with funding ASIC’s costs of recovery action from broking. We are also not prepared to see this fund any potential vicarious claims or undertakings against brokers which result in actions that rule against ASIC. Any implemented funding model won’t launch until 2019.
Meanwhile, although we have received a formal apology from Treasury, the FBAA has lodged a formal complaint over the last minute decision to grant an extension to the deadline for industry intermediaries (only as this is not for all stakeholders) submissions for this which has now been pushed back to the middle of January 2017. In short, the MFAA came out saying this was a postive thing that they had negotiated for industry, but it was self-serving only as their house was not in order. Industry stakeholders knew the timeline six weeks out and it is plainly unfair and unacceptable that those who couldn’t organise it in time are rewarded with an extension.
It is important to note however this had no impact on the FBAA’s submission on this, but it has delayed our critical industry paper on our Global Research Paper into Home Loan Commissions to the Minister which is unacceptable when caused by other people’s tardiness. The finalisation of the review into Home Loan Commissions we will be able to further update you on as we go into the first quarter of 2017 as ASIC are still finalising their report which is due to the Minister by the end of December.