ASIC walks back comments on advice sector refunds

In a question on notice, Liberal senator Slade Brockman asked ASIC to clarify its previous statements to Parliament that costs will be credited to the relevant subsector of the industry that has had to pay for historic cases if the regulator is successful in court.

“Can you please advise what proportion of the fully allocated costs that are charged to financial advisers as a result of enforcement/court action would typically be recovered through a court award of expenses?” Senator Brockman asked.

“In the event that ASIC is successful in a court action and penalties are awarded, do these penalties reduce the ASIC funding levy or do they go into consolidated revenue?”

The regulator said that its enforcement activity “may consist of hundreds of matters in progress at any one time”.

“Not all enforcement matters result in litigation and not all litigation results in an award of costs in ASIC’s favour,” the regulator said.

“Where costs are awarded and able to be collected by ASIC, the costs recovered from industry are reduced.”

Rather than directly refunding the relevant subsector, the regulator’s comments suggested that any costs awarded in a case would offset its general enforcement expenses.

ASIC pointed to its cost recovery implementation statement (CRIS) for the 2019-20 year, where there had been a small offset for $4 million in costs awarded through litigation.

“[Cost reduction] is disclosed in ASIC’s CRIS and our annual dashboard report as ‘costs funded by own-source revenue’,” the regulator said.

“ASIC’s 2019-20 dashboard report shows that ASIC’s total enforcement costs were $86.3 million and costs funded by own-source revenue was $4.6 million.”

ASIC also clarified that penalties awarded in court cases went to consolidated revenue rather than offsetting industry supervisory costs.

“As a matter of law, penalties go directly to the Commonwealth Consolidated Revenue Fund. Penalties are imposed as a deterrent and bear no relationship to ASIC’s regulatory costs,” the regulator said.