Industry questions reduced ASIC oversight

Just two years after it was established in the aftermath of the financial services royal commission, the FRAA has had its review cycle changed, and will now only review the activities of the Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) every five years, as opposed to the current two.

In the budget papers released on Tuesday night, the government outlined $162.4 million of funding over four years from 2023–24 to “support the delivery of government priorities in the Treasury portfolio”.

The budget papers add that the costs “will be partially offset by reprioritisation of existing functions within the Treasury portfolio and by reducing the frequency of Financial Regulator Assessment Authority reviews from every two years to every five years”.

In its response to the budget announcement, the Financial Advice Association Australia (FAAA) criticised the lack of consultation before this change was implemented.

FAAA chief executive Sarah Abood said: “It is disappointing to see this highlighted as a budget saving in the context of recent regulator reviews and when no consultation with industry has been undertaken.”

Similarly, FAAA interim general manager policy and advocac, Phil Anderson, expressed disappointment in the government's lack of consultation.

"The reduction in the frequency of reviews of ASIC and APRA by the FRAA was seemingly being done as a cost reduction measure, however this has not been subject to consultation and that it was potentially not ideal given that the regulators had been subject to review recently by a number of parties," Mr Anderson told ifa.

"In the absence of further information on this, we are not convinced that a review frequency of every five years is sufficient".

Clarity on ASIC levy

In addition to her concerns around the reduction in regulatory oversight, Ms Abood also added that the FAAA was keen for clarity on the ASIC levy.

“The costs for advice businesses continue to rise and it is a high priority to minimise the impact of the levy being unfrozen from the current financial year,” she said.

“A great way to make financial advice more affordable for consumers is to reduce the business costs involved in the provision of advice — and this is one important way the government can assist.”

The FRAA was established in response to recommendations 6.13 and 6.14 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and is tasked with reviewing and reporting on the effectiveness and capability of ASIC and APRA.

The then treasurer Josh Frydenberg announced the creation of the FRAA in April 2021.

“In establishing the FRAA, the Morrison government is ensuring that Australia’s financial regulators will continue to be strong and effective, maintaining the community’s trust and confidence in the financial system,” Mr Frydenberg said at the time.

The FRAA delivered the findings of its inaugural review of ASIC in August last year, making four recommendations to improve the effectiveness and capability of the corporate regulator.

The watchdog’s first review was a targeted assessment of ASIC’s effectiveness and capability in strategic prioritisation, planning and decision making, ASIC’s surveillance function, and ASIC’s licensing function. It also examined the regulator’s use of data and technology in each of these areas of focus.

It has not yet delivered its first review of APRA, with consultations conducted from 3 November to 15 December 2022.