Government says 'Yes ASIC'

By Malcolm Stephens
Banking Financial Services Financial Services Royal Commission Funds Insurance Superannuation

In brief

Written by Partner Malcolm Stephens

The FSI recommended that the Government 'Introduce an industry funding model for Australian Securities and Investment Commission (ASIC) and provide ASIC with stronger regulatory tools'. This recommendation (No.29) covers two topics that ASIC has pursued on a number of occasions, including in its submissions to the FSI. The first is ASIC's preference to move to an industry funding model; and the second is ASIC's recommendation that penalties under ASIC-administered legislation be increased.

The government has courageously announced that these recommendations will be… subject to further consultation and review.

Industry funding

The FSI recommended an industry funding model for ASIC. ASIC has been pushing for such a model to give it greater certainty as to its levels of funding (it is no doubt wary of further funding cuts); to improve transparency; and to ensure that entities regulated by ASIC pay an amount that reflects the benefit they receive from that regulation. Although many companies might happily forego both that benefit and the associated fees, the government had indicated its in-principle acceptance of an industry-funded model, on the basis that those who create the need for regulation should pay the cost of that regulation. The issue of industry funding is also currently the subject of a consultation paper (see Unravelled: Proposed industry funding model for ASIC for more detail) and has been referred to the Committee conducting the ASIC capability review (which is due to finish at the end of the year). Sir Humphrey would be proud.

Enforcement powers

The FSI also recommended strengthening ASIC's enforcement powers – in particular, by increasing the penalties for breaches of legislation administered by ASIC. ASIC has been pushing for greater penalties for some time, on the assumption (not necessarily backed by evidence) that greater penalties will lead to less crime. ASIC frequently compare the comparatively small penalties under legislation that it administers with the large penalties in foreign jurisdictions and under legislation administered by other Australian regulators. Last year, the chairman of ASIC memorably asserted that Australia was a paradise for white-collar criminals because of its 'soft' penalties – an assertion subsequently altered to a suggestion that Australia could become such a paradise. Despite this paradise still seeming some way off, the government stated that it 'accepted' the recommendation – by deferring it for further consideration in 2017. Sir Humphrey couldn't have handled it better.

What's next?

Despite the lack of immediate action, it is likely that an industry funding model will be introduced for ASIC in the near future. It also seems likely that, in the current political climate, it will be difficult to resist the push for tougher penalties for white-collar crimes, although such penalties are unlikely to be introduced in the next 18 months.