Cost of ASIC’s unlicensed advice enforcement hits $4.5m

During Senate estimates in June, Liberal senator Jane Hume questioned Australian Securities and Investments Commission (ASIC) commissioner Alan Kirkland about the “quantified cost of enforcement” for unlicensed operators providing financial advice during the last cost recovery period.

Having taken the question on notice, ASIC has now detailed that the cost of enforcement work in relation to unlicensed operators in the financial advice sector was $4,488,157 during the 2022–23 financial year.

In its cost recovery implementation statement (CRIS) for FY22–23, attributed a cost recovery amount for the financial advice sector of $55.5 million. This figure was reduced by nearly $8 million to $47.6 million in November 2023, ultimately lowering the cost to advisers by around $400.

In the original CRIS, ASIC detailed that its total estimated enforcement costs for the sector was $18.2 million.

Senator Hume also asked Kirkland about the extent to which financial advisers and financial professionals report this activity to ASIC.

“I would imagine they’ll see an Instagram post or they’ve received an unsolicited phone call or whatever it might be. They realise it’s unlicensed financial advice and they report it to you. How often does that happen?” Hume asked.

Kirkland responded that while he would need to take it on notice, his engagement with financial advice industry bodies has shown unlicensed advice is a “matter of concern to them”.

“While I understand their concerns about the way in which the levies are allocated, they are also keen to see ASIC take action in relation to unlicensed conduct,” he told Senate estimates.

“For example, we’ve recently released some information on cold-calling practices in relation to superannuation. Some of that potentially involved unlicensed financial advice conduct. And in talking to organisations like the Financial Advice Association, they’ve welcomed us taking action in relation to those practices because of the harm it does to the industry, in general.”

In its response to the question on notice, ASIC said that about 12 per cent of reports of alleged misconduct it received for FY22–23 about unlicensed financial services were lodged by financial industry professionals.

“ASIC receives and records information about the reporter of alleged misconduct, such as being a financial industry professional, through our online electronic report of misconduct form,” it said.

“Where reports are received by other means, such as hard copy or email, our system does not record this reporter information.

“For the financial year 2022–23, ASIC received 563 reports of alleged misconduct about unlicensed financial services. Of these, 414 reports were lodged online and 12 per cent of the reporters identified themselves as being financial industry professionals.”