IMAP highlights ASIC Levy funding error for MDA

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The Government has released its draft regulations of the industry funding model for ASIC, which is due to come in place on 1 July this year, with IMAP playing a significant role in reducing the levy that would apply to MDA providers.

According to the draft explanatory statement issued by the Government, the ‘ASIC Supervisory Cost Recovery Levy Act 2017’ will impose a levy on entities regulated by ASIC to recover its regulatory costs. It is proposed that this levy either be a flat or graduated levy, depending on the size and activity of each industry sub-sector regulated by ASIC.

For the financial advice sector, a flat rate levy is proposed for licensees that provide only general advice to either retail or wholesale clients, as well as for licensees that provide personal advice to retail clients on products that are not relevant financial products, and for licensees that only provide personal advice to wholesale clients.

Kelly O’Dwyer
Kelly O’Dwyer

For these licensees, there will be a minimum charge of $1,500, with the fee increasing from that base depending on the number of planners authorised to work under the licensee’s AFSL. ASIC will provide the exact costs of the levy to licensees annually.  

However, in the Government’s initial proposals document, MDA services were included as a sub-sector of the Investment Management sector. As such, MDA providers were assessed for a fixed levy under this regime based on ASIC’s estimated cost to regulate MDA providers of $200,000 or 0.1 per cent of ASIC’s costs.

“Because ASIC had miscalculated the number of MDA providers – assuming there are 64, when in fact, there are nearly 200 – the regulator initially proposed a levy on each AFSL with MDA provider authorisation of $3,000, in addition to any other levies they were liable for, such as, per authorised representative,” said IMAP chairman, Toby Potter.

According to Potter, IMAP notified both ASIC and Treasury, pointing out this error and requesting that the levy be reduced to the more reasonable figure of $1,000.

“To our delight, we have received a response agreeing that, at this stage, the figure of $1,000 is the correct amount,” Potter said.

However, Potter identified another point arising as a result of the termination of the LMDA facility.

“We’ve also made the point that it would be unfair if existing MDA providers end up covering the cost of assessment for LMDA advice businesses that apply for an MDA providers’ authorisation and that this should be covered under the advice sector of ASIC,” Potter said.

A copy of this letter is available on the IMAP website.

Commenting on the draft regulations, the Minister for Revenue and Financial Services, Kelly O’Dwyer, said industry funding for ASIC would ensure that its regulatory costs are recovered from “those entities that create the need for regulation”.

“This will make the industry more accountable and by increasing the transparency of ASIC’s costs and activities, make ASIC a stronger regulator,” O’Dwyer said.

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