Big business to bear the brunt of funding user-pay ASIC under new plan

Large corporates will be asked to fork out for the lion’s share of costs under a user-pay model the federal government plans to introduce to fund the Australian Securities and Investments Commission’s regulatory activities.

Assistant Treasurer Josh Frydenberg today released a consultation paper for the new model, which will shift most of the burden of paying for the corporate regulator’s activities from taxpayers to the private sector.

Under the model, fees and levies paid by the private sector will total $196 million in the 2016-17 financial year, which will cover most of ASIC’s forecasted $263 million in running costs.

Around one quarter of those fees and levies, approximately $53 million will come from public and unlisted businesses, with the 2000 firms listed on the Australian Securities Exchange to pay most of the fees.

For publicly listed companies that disclose financial reports, the annual fee would be calculated based on the company’s market capitalisation, with a proposed maximum annual fee of $320,000 for companies with market capitalisations above $15 billion.

For all other public and proprietary companies, the government is proposing a flat annual fee, ranging from $920 for non-listed, disclosing public companies, to $160 for non-listed, non-disclosing public companies, $350 for large proprietary companies and just $5 for small proprietary companies.

Some SMEs in the financial services sector will be asked to contribute to the costs, with the 5100 holders of Australian financial services licences to pay around $91 million; however this sector is dominated by investment banks, insurers and superannuation providers.

Approximately $13 million of the estimated costs are expected to be paid by the stock markets, $24 million by lenders, $9 million by liquidators and the remaining $6 million will come from auditors.

Adopting a “user-pay” model for ASIC was recommended by the financial services inquiry and Frydenberg said the consultation paper is part of the government’s response to the Murray Inquiry.

“The Murray Inquiry observed that an industry funding model would provide more funding certainty for ASIC and enhance the transparency of ASIC’s costs and operations,” Frydenberg said.

The assistant treasurer said the funding model will “ensure that the costs of the regulatory activities undertaken by ASIC are borne by those creating the need for regulation, rather than all taxpayers”.

Frydenberg said the industry funding model will also “establish price signals to drive economic efficiencies in the way resources are allocated in ASIC” and “increase ASIC’s accountability to its stakeholders”.

Peter Strong, executive director of the Council of Small Business of Australia, welcomed the release of the consultation paper this morning, telling SmartCompany he supports the move towards a “user-pay” or even “fee for service” model.

Strong says ASIC chairman Greg Medcraft has long advocated for this type of funding model and the government has also previously indicated its intentions to move in this direction.

“We support this, it’s another good thing for small business,” Strong says, adding the current annual ASIC fees paid by small businesses will drop dramatically if the model is introduced.

“It’s a really good step in the right direction.”

Strong says COSBOA will work with other parties to ensure there are no “unintended consequences” from the change and he hopes the changes in fees will be communicated well to the small business community.

“It has to be done methodically, because when you rush, that’s when things can go wrong,” he says.

Interested parties are invited to make submissions about the proposal up until close of business on October 9.

“The government is committed to broad consultation with the community on the potential introduction of industry funding for ASIC, before making any decision,” Frydenberg said.