ASIC’s remuneration model is conflicted

Problem is, the government doesn’t think. It gets funded. And just like ASIC, whoever pays the most will call the shots; big business has the pollies over a barrel.

I’m calling out the conflicts that could easily occur as a direct result of ASIC’s industry funding model. This whole ‘user pays’ system is ridiculous.

The corporate watchdog’s costs will be spread across 48 industry subsectors. How much everyone pays will depend on what it cost ASIC to regulate them in the previous financial year.

“The cost of ASIC's work in each subsector is forecast in ASIC's annual Cost Recovery Implementation Statement – or CRIS,” the regulator said.

“The CRIS is a document that ASIC will publish each year which will set out the expected expenditure on its regulatory activities. The CRIS is a key part of ASIC's accountability to government and industry around the transparency of our costs.”

ASIC’s summary of FY18 indicative levies puts listed corporations at the top of its donor list, with an expected recovery cost of $34 million. There are over 2,000 entities in this category, mind you, all expected to pay a flat fee of $4,000.

But then there is the graduated levy, which is 19 cents per $10,000 of market cap above $5 million. The bigger you are, the more you pay. And in a world where money talks that means leverage. Just ask the politicians who thought up the idea.

ASIC expects the maximum levy to be around $396,000 for entities with a market cap greater than $20 billion. Like the major banks, for example. CBA currently has a market cap of around $126 billion; Westpac $97 billion; ANZ $82 billion; and NAB $76 billion.

It’s a convenient model. Pull some numbers together to calculate what it cost last year to regulate each industry subsector and then charge them that.

But there is plenty that can go awry here if the regulator is not supervised. Like becoming lenient on those who pay more and perhaps even doing their bidding as exterminators of the underlings. It’s thoughts like this that are along the lines of what Dover’s Terry McMaster has been shouting about – that ASIC doesn’t play fair and takes its cues from the big end of town. Besides, the royal commission has already shown this to be the case.

Peter Kell clearly saw the writing on the wall. He's off. Months before he was due to retire. Another scalp for Hayne’s trophy case, no doubt.

Luckily the government is in control. On Tuesday (18 September) the newly appointed Treasurer announced that ASIC are no longer public servants. Brilliant.

“These amendments enhance the Australian Securities and Investments Commission’s (ASIC) capabilities, by providing it with greater operational flexibility and making express provision for ASIC to consider competition in its decision-making processes,” a statement from the Treasurer said.

“Removing the obligation for ASIC to engage staff under the Public Service Act 1999 means ASIC will be able to compete more effectively for suitable staff. It will also allow ASIC to tailor management and staffing arrangements to suit its needs, ensuring it is fit for purpose to deliver effectively on its mandate.”

The government has now decided to remove ASIC from the public service (they never did us much good anyway, let’s be honest) and given them free reign to “compete” for suitable staff. That means pay rises, people. Hell, maybe even bonuses? They must stay competitive after all.

ASIC is a racket. They’ll be funded by the big companies and used as enforcers to sic on any operator the big boys want out of the game. The industry funding model should be called out for what it is – a conflict of interest and a bad joke by a government too scared to pay for a real regulator out of the federal budget. Driven by the maddening fear of losing the confidence of the Australian public. Too late.