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The Department of Home Affairs has issued its draft guidance “Modern Slavery Act 2018: Draft Guidance for Reporting Entities” (Draft Guidance) for the new Modern Slavery Act 2018 (Cth) (the Act).
Legislation for the Australian Securities and Investments Commission’s (ASIC) industry funding model became effective on 1 July 2017. Under the ASIC Supervisory Cost Recovery Levy Act 2017 (Cth) (Act), any entity that is regulated by ASIC (leviable entity) will need to pay a levy for the financial year they were regulated to recover ASIC’s regulatory costs. All companies registered under the Corporations Act 2001 (Cth) are leviable entities, with Australian financial services (AFS) licensees and Australian credit licensees specifically identified. The first invoices will be issued in January 2019 and will recover costs for regulatory services for the 2017-18 financial year. On 14 July 2017, ASIC released Report 535 ASIC cost recovery arrangements: 2017-18, which provides greater detail on how the levies will be applied.
The Act outlines that the amount of levy payable is to be worked out in accordance with regulations and legislative instruments prepared annually. The ASIC Supervisory Cost Recovery Levy Regulations 2017 (Cth) (Regulations) outline the mechanisms to calculate levies payable.
Broadly, the Regulations impose either a basic (i.e. flat/fixed) or graduated (i.e. variable) levy, or some combination of both (i.e. a graduated levy with a fixed minimum component and a variable component), on leviable entities in different industry subsectors regulated by ASIC. The type of levy depends on the level of variation in ASIC’s regulatory costs for that particular subsector.
For example in the financial advice sector, an AFS licensee providing general advice only to retail or wholesale clients will be subject to the basic levy. Under the Regulations, the basic levy would be calculated as the regulatory costs divided by a “metric” (which is a number determined by ASIC in an annual determination) for all AFS licensees providing general advice in the financial year. However if the AFS licensee is also authorised to provide financial product advice to retail clients, and provides personal advice in the relevant financial year, they will also be subject to the graduated levy.
Other subsectors of note that are identified as leviable entities include custodians, managed discretionary account providers, payment product providers and responsible entities of registered schemes. A full list of subsectors is available in Schedule 1 of the Regulations.
Given the applicable levies for leviable entities, licensees should be aware that these changes may impact what services they seek to offer. Under the Regulations, licensees may be required to pay both flat and graduated levies if they form part of two or more of the relevant subsectors. Licensees should consider the suitability of the authorisations they currently possess on their licence, and whether they are necessary for their core business given the potential to attract additional levies for services which may be ancillary.
Additionally, the ASIC Supervisory Cost Recovery Levy (Collection) Act 2017 (Cth) (Collection Act) establishes penalties in the event of late payment or shortfalls in payment of levies required. The Collection Act imposes a penalty at the rate of 20 per cent per annum for failure to pay by the due date.
Where a person makes a false or misleading statement to ASIC in a return which results in a lower levy, the Collection Act also imposes a penalty of twice the shortfall amount. Further administrative action may be taken if any levies or penalties remain unpaid for 12 months (e.g. deregistration or licence suspension or cancellation).
In addition to providing an overview of the implementation of cost recovery arrangements discussed above, this report also details changes to the cost recovery methodology for each subsector in 2017-18.
These changes have been implemented as a result of feedback received by Treasury in response to its proposals paper titled Proposed industry funding model for the Australian Securities and Investments Commission, which was released in November 2016.
Key highlights include:
Please be in touch if you would like to discuss the impact of the industry funding regime on your business or licence.