ASIC Funding Levy and Penalties

AFA News 22 April 2021. Last Friday, ASIC issued their enforcement update for the second half of 2020, highlighting that during this period their enforcement actions have resulted in courts awarding civil penalties of nearly $160 million.  Obviously not all or even the majority of these penalties would apply to financial advice.

Naturally, this generated some outcry amongst the financial adviser population with respect to why this was the case when the ASIC Funding Levy had increased so much, and whether financial advisers would get any benefit in terms of a reduction in the ASIC Funding Levy from these large penalties.

The AFA held discussions with ASIC earlier this year about the reasons for the significant increase in the ASIC Funding Levy for the 2019/20 year and how the enforcement activity impacts the levy.  We were advised by ASIC that any penalties that are generated from enforcement activity go to Consolidated Revenue, so Government gets the benefit of that.  It does not go back to ASIC.  In most court action that ASIC takes, where they win, they are also awarded costs.  The awarding of costs is often delayed and the details on this are a less public outcome.  It seems that cost recovery is often around two thirds to three quarters of the actual costs involved in the matter.  The recovery of costs will ultimately result in a reduction of the ASIC Funding Levy, however we have little visibility of specific matters or the timing of any cost recoveries.

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Issued 22.04.2021. AFA Policy & Education Update