ASIC faces questions on soaring levy costs

The AFA pointed to the cost increase in its submission to ASIC’s consultation on affordable advice, saying the estimated levy charge for those providing personal advice in the 2020 financial year had been revised upwards from $40.1 million in June 2020 to $56.2 million in November 2020.

Factoring in the approximately 21,000 advisers authorised to provide personal advice to retail clients, the revised levy costs equate to around $2,400 per adviser, a significant increase on the $1,571 per adviser listed in ASIC’s cost recovery implementation statement in June 2020.

“We are not aware of the reason for the very late increase in costs from $40.1 million to $56.2 million, however we would assume that this could be attributable to enforcement expenses,” the association stated.

The regulator had ramped up its enforcement efforts dramatically in the last quarter of 2020, embarking on a ‘litigation blitz’ that saw it commit to filing 15 civil cases in November and December and referring 20 briefs of evidence to the Commonwealth Department of Public Prosecutions.

The SMSF Association had also referred to soaring levy costs in its submission to the affordable advice consultation, suggesting supervisory charges should be decreasing rather than increasing over time as ASIC made better use of modern regulatory technology.

Similarly, the FPA has called for a review of the levy in its pre-Budget submission, saying the fluctuating costs in ASIC's estimates made it impossible for advisers to accurately factor it into their business plans.

Questions were raised around the updated levy charges for 2020 when ASIC’s November summary of levies, accessible from the regulator’s website in December, disappeared in January to be replaced with the original June estimate.

It’s understood the AFA had sought an explanation from government as to the drastic increase in charges, in the context of COVID-19 and other regulatory pressures on adviser businesses.

After ifa sought clarification on the issue, the updated November estimates were returned to the ASIC website.

The regulator told ifa the figures had been taken down “pending considerations of additional COVID-19 related measures”.

But with the government keen to pump the brakes on COVID relief spending as current outbreaks subside and the economy begins to recover, it's understood further broad relief for the sector was unable to be confirmed.

“ASIC will continue to consider relief measures due to the impact of COVID-19 on a case-by-case basis,” the regulator said.