ASIC has recommended the introduction of a ‘user pays’ funding model be put in place for the services the regulator provides the financial services industry.
The regulator says the cost currently imposed on the regulated population do not accurately reflect the costs of regulation and revenue collected by the government from the new sectors under the regulator’s jurisdiction is “increasingly misaligned”.
In its submission to the Financial Systems Inquiry, it recommends moving to a user pays funding model, where costs are recovered specifically from those who engage in regulated activities and those who benefit from a well-regulated market and financial system.
Stakeholders engaged in those regulated activities would be charged the fee each time the service was required.
All costs not recovered by fees would be aggregated at the stakeholder-group level, and would form the basis of levies charged to external stakeholder groups on an industry basis. The levies would cover the costs of regulatory activities that generally relate to those groups, but not to individual entities.
“At present, the populations ASIC regulates are not charged in proportion with the benefits they receive from our regulation,” it said.
“There are also no economic incentives (price signals) in the market for the use of ASIC’s resources. Stakeholders acting rationally will seek to efficiently allocate their own resources and may choose low-cost or no cost ASIC services over other, more costly, alternatives available in the market (e.g. private legal advice).”
It says the use of ASIC’s resources and subsequent price signals would allow businesses to identify the cost of regulation needed to achieve the desired regulatory outcome.
The regulator also made comment on the competition within the mortgage industry.
“With non-bank lenders now re-entering the mortgage market, competition for borrowers again appears to becoming increasingly active in the mortgage broking industry through outright ownership or significant shareholdings in some of the larger mortgage broking entities.”
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