Advisers charged for Westpac general advice case

Responding to questions on notice from Western Australian Liberal senator Slade Brockman, ASIC said the increase in the 2019-20 levy for the advice industry, which was revised up by more than 60 per cent between June and November last year, had been “primarily due to the increase in enforcement activity in this sector following the Financial Services Royal Commission”.

The response was received just prior to the regulator releasing its most recent estimates for the 2020-21 levy, which have seen another 30 per cent increase in costs attributed to the sector and calls from industry bodies for ASIC’s funding model to be urgently addressed.

In a further question, Senator Brockman asked if the advice sector had been charged for the case ASIC took to the High Court around Westpac call centre staff being found to have given personal, rather than general, advice to customers over the phone.

“Given that this issue related to super funds that were operating on a general advice model, did financial advisers who provided personal advice to retail clients end up paying any of the costs of that action?” he asked.

In its response, ASIC said both the super and advice sectors had been charged for the court costs in the case.

“Under the ASIC industry funding model (IFM), the cost of enforcement matters is attributed to industry subsectors based on the effort allocation for each matter,” the regulator said. 

“The guiding principle under the IFM is to allocate costs for each enforcement matter based on the sector(s) or subsector(s) in which the misconduct occurred (i.e. the reason the case is being investigated). 

“Therefore, where the issues in a particular enforcement matter involve multiple industry sectors or subsectors, the costs are apportioned across the relevant sectors/sub-sectors.”

The regulator said actions related to unlicensed conduct in the advice sector were “in the interests of the licensed participants in that sector, because it maintains integrity and trust in the licensed sector and deters competition from unlicensed and unregulated competitors”.

“Where ASIC is successful in court, any costs awarded and paid to ASIC will be credited to the relevant subsector(s), with the levy for those subsectors reduced accordingly,” ASIC said.

“There is likely to be a delay between when costs are incurred and when costs are recovered, which means levies for one financial year will include ASIC’s enforcement costs, but with any crediting of costs likely to occur in another financial year.”

With penalties in the Westpac case to be determined this month, ASIC said it would soon be “in a position to pursue recovery of costs of the litigation”.