The Government has released a consultation paper seeking views on its proposed industry funding model for ASIC.

The Government’s decision will also be informed by the findings of its Capability Review of ASIC which is due to report by the end of 2015.

Under an industry funding model, the costs of ASIC’s regulatory activities (including the costs of capital expenditure) would be recovered from industry through:

• annual supervisory levies that reflect the portion of ASIC’s activities dedicated to each of its regulated sectors; and
• fees-for-service that reflect ASIC’s actual costs in providing specific on-demand services to individual entities.

To ensure each type of company pays a levy equal to the cost of its regulation, the Government is proposing:

• a tiered annual levy for public companies (listed, disclosing) based on market capitalisation;
• a flat annual levy for public companies (non-listed, disclosing);
• a flat annual levy for public companies (non-disclosing);
• a flat annual levy for large proprietary companies; and
• a flat annual levy for small proprietary companies.

The Government would also charge entities an up-front fee for the following regulatory activities: licensing and professional registration services; the processing of applications for relief lodged with ASIC; and ASIC’s formal compliance review of documents lodged by entities under the Corporations Act. This is because these activities are completed at the request of a specific entity.

Some current fees will be abolished and the cost absorbed into ongoing annual levies. For example, there will be no fee for an Australian credit licence annual compliance certificate.

Credit licensees
To ensure that the levies on Credit Licensees reflect ASIC’s costs, the Government is proposing to:

• introduce two levy categories — one for those entities that engage in credit activities as a credit provider and one for those that operate as credit intermediaries; and
• tier the levy payable by each category of entity with reference to the credit volume that they provide (as reported in the licensee’s annual compliance certificate (ACC)).

For example, the cost of an Australian credit licence application for a Person/Sole trader, under $100 million, (currently $484 – $623) would increase to $5,700.

Deposit Product Providers
For Deposit Product Providers, levies will be tiered based on the total value of deposit liabilities.
The tiers that will be applied are:
a) Greater than $100 billion in deposit liabilities;
b) Greater than $10 billion in deposit liabilities; and
c) Less than $10 billion in deposit liabilities.

Exempt operators
Due to data limitations, ASIC regulated entities who rely on an exemption under ASIC’s Class Order Instruments will not initially be levied.

Phase in arrangements

The Government proposes that:
From 1 July 2016: Set fees to recover 100% of ASIC’s fee-for-service activities. Set levies to recover 50% of ASIC’s costs attributable to the financial services industry
From 1 July 2017: Set fees to recover 100% of ASIC’s fee-for-service activities
Set levies to recover 100% of ASIC’s costs attributable to the financial services industry
Set levies to recover 50% of ASIC’s costs attributable to remaining industries
From 1 July 2018: Recover 100% of ASIC’s costs (subject to any exclusions)

For the purpose of the proposed phase in levy arrangements, the financial services industry is defined as AFS Licensees, Market Infrastructure Providers and Australian Credit Licensees.