Why penalties can’t fund the ASIC levy
If the Australian Securities and Investments Commission (ASIC) levy was partly funded by penalties paid by individuals or businesses it would look like an incentive to aim at players with big pockets.
ASIC was questioned during a parliamentary committee as to why penalties went into consolidated revenue rather than offsetting some of the levy costs paid by financial advisers.
ASIC chief operating officer, Warren Day, said there were significant dangers in perverse incentives.
“The accusation might be made that we would continue to aim at those players who have deep pockets and are able to pay for the sake of, if you like, improving our budget,” he said.
“That's not what we are here to do. What we are here to do is to ensure that the law is applied properly and, where need be, prosecuted properly.
“Otherwise, what you have is us targeting people, or the accusation that we would be targeting people, purely because we might be able to get a decent penalty out of the matter.”
ASIC deputy chair, Sarah Court, said she would have significant concerns when it came to significant penalties which were potentially hundreds of millions of dollars coming back to ASIC.
“It would come to ASIC to fund its enforcement or other supervisory work, I think. There should be no incentives for a regulator to, in effect, maximise a penalty for it to use. I would very much be very interested in exploring these issues that the committee has raised with us,” she said.
“But I'm not sure that I'm speaking personally here, as the legislatively informed person on this call, that the answer lies in that penalty route suggested. But I would very much like to think about these issues further.
“Is it right that enforcement costs are recoverable against an overall industry when the enforcement action is taken against people that have contravened the law?”
When asked the difference was in ASIC recovering court costs and recovering funds from a penalty, Court said the court costs were costs that had been incurred in the investigation or prosecution of a matter.
“If ASIC recovers $10 million, what do we do with that? We are, in effect, receiving potential funds, so it's almost like generating a new revenue stream for ASIC,” she said.
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