A proposed funding model for corporate regulator ASIC has come under fire by consumer groups who say the model could lead to a weaker and less effective regulator.
In a submission to Treasury, the consumer groups say that the proposed model gives industry too much say over the body designed to police them. The groups are recommending that the proposed changes instead focus on giving ASIC the funding it needs to do its job.
The joint submission from nine consumer advocacy organisations including Consumer Action Law Centre, CHOICE and National Seniors supports moving ASIC to an industry funding model, but opposes the model proposed by Treasury’s consultation paper.
The submission argues that the proposed funding model falls short because it does not ensure ASIC will have adequate funding to fulfil its consumer protection role, and because it does little to improve the stability of funding. The groups argue that this funding model may in fact reduce the amount of money ASIC has for regulation and enforcement.
Consumer Action Law Centre CEO Gerard Brody said: “The Financial System Inquiry panel recommended an industry funding model because they accepted that ASIC needed more funding and better tools. That objective is nowhere to be seen in the proposed model.” “There is little point in moving ASIC to an industry funding model unless it guarantees that ASIC will end up with more money to spend on regulation and enforcement, and more stability of funding. If they end up with less funding and less stability as a result, a weaker ASIC will help no one,“ said Brody.
CHOICE CEO Alan Kirkland said: “We have years’ worth of official investigations and reports that show that ASIC needs additional funding in order to protect consumers from the worst elements of the financial industry.
“The proposals put forward in the consultation paper would not guarantee a strong, consumer-focused regulator. Instead, some options would lead to ASIC spending significant resources responding to industry concerns. Funding levels, particularly for crucial consumer protection work, should be determined by consumer need or strategic goals, not industry whim,” said Kirkland.
National Seniors CEO Michael O’Neill said: “Superannuation has seen financial risk shift to individuals. The corporate watchdog must become much more consumer-focussed. And, to be effective, it needs bigger teeth.”
The submission also argues that the model could undermine ASIC’s independence by allowing business to influence ASIC’s overall funding and where ASIC spends its resources.
The joint submission recommends that:
- any proposed model should explicitly state an intent for ASIC to have more resources to regulate problem sectors than it currently has with funding to remain, at minimum, consistent with the Consumer Price Index;
- funding should be reviewed every three years (as recommended by the FSI final report) rather than annually; and
- the industry consultation process should be limited to technical matters like calculation of levies, and how the levy should be spread across the industry. Consultations should not be permitted to question ASIC’s assessment of sectoral risk or total amount of the levy itself. This will limit the cost of consultation and protect ASIC’s independence.