The Senate committee hearing on the Single Disciplinary Body (SDB) legislation provided advice association representatives with a prime opportunity to air some of the industry’s biggest grievances over the past few years (you can read more about it here).
Fortuitously, discussions during the hearing also suggested there might be some scope to amend the legislation so as to address some of these concerns. Well, at least in some areas – one imminent worry for many advice businesses is what they’re going to be charged for the ASIC levy in 2022, and as we’ve seen before, the regulator’s initial estimates aren’t always the most reliable way to budget for next year’s costs.
These concerns are especially relevant in the midst of the Better Advice Bill going through the Senate, because the legislation necessitates an expansion (or at least reorganisation) of ASIC’s responsibilities – which one would assume carries associated costs that will inevitably be charged to advisers under the industry funding model. As ASIC commissioner Danielle Press has previously explained, it’s basic, “mechanical” maths: whatever ASIC spends on regulating an industry each year is then recovered from that industry.
Controlling costs
For this reason, the costs of ASIC operating the SDB were highlighted during the hearing as a potential issue for advisers. AFA acting CEO Phil Anderson, for example, said that this year’s levy hike meant it was “critical that the cost of the SDB is carefully considered and controlled,” adding that, once again, no regulatory impact statement accompanies legislation that could have a material impact on advice businesses’ bottom line.
Whatever those costs might be, Anderson recommended that “any revenue raised through the application of infringement notices should offset the cost of the single disciplinary body rather than being paid into Consolidated Revenue.” This, of course, refers to one of the biggest criticisms of the original industry funding legislation, which is that the regular fines and penalties ASIC recovers throughout the year aren’t offset against the levies advisers pay.
While that legislation was outside of the Senate committee’s purview, one might hope that – at the very least – there’d be some further clarity on how much the SDB will actually cost for ASIC to operate. Based on ASIC’s comments during the hearing, though, it’s still up in the air.
An open question
When asked about the regulator’s resourcing to implement the SDB legislation, ASIC financial advisers senior specialist Martin Stockfield said it was “difficult for us to estimate the exact level of resources” because “we don’t yet know exactly how many matters and what sort of matters we will necessarily be referring to the panel.”
Although ASIC hasn’t received any extra funding to implement the Better Advice legislation – funding that former chair James Shipton indicated would be the primary driver of a levy increase next year – the regulator didn’t rule out new costs for advisers.
“To the extent that this bill may mean that ASIC will spend more of its resources on the financial advice population,” ASIC financial services and wealth executive director Joanne Bird explained, “then the financial advice population will pay more under the industry-funding model.”
How much more? No one knows – not even ASIC. As Senator Rex Patrick put it, “we’re going into this a little bit blind,” adding that “there are questions as to why Treasury haven’t provided the necessary details or, indeed, the regulation impact statements.”
There are definitely questions. The first stage of the SDB legislation is set to commence on January 1st and there’s still very little concrete information on what that’s actually going to cost in terms of industry levies.
For those advice businesses trying to plan out their 2022 expenses, a little clarity from Government is well overdue.
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