Submission: Draft Cost Recovery Implementation Statement: ASIC industry funding model (2018-19)
ARITA has made a submission on the draft Cost Recovery Implementation Statement (CRIS) for 2018-19 and reiterated its fundamental concerns on the operation of the industry funding model (IFM) as it applies to the Registered Liquidator subsector.
Referencing its numerous previous submissions and correspondence, the submission highlighted:
The significant negative market consequences of the IFM for Registered Liquidators which has diminished the proper, competitive operation of the market, placing the proper operation of the economy at risk, especially in any future recession as these skills will be lost to the market.
The IFM levy is considerably unjust given the very high cost per liquidator compared to other similar regulated populations and international comparatives; it also disregards for the work done by liquidators in support of ASIC and the limited benefits from the current ASIC supervision.
The ex-post nature of the levy has resulted, and will continue to result, in creditors being disadvantaged due to the distinct and finite nature of insolvency appointments. Given the discrepancy between the estimated and actual metric for 2017-18, there is a lack of confidence within the subsector as the accuracy of the 2018-19 estimate of $81 per metric event, particularly given its calculation based on the knowingly higher than actual number of Registered Liquidators (more detail on this point is covered in the submission).
Further, the ex-post nature of the levy also means that insolvency practitioners cannot budget for the significant costs they face, particularly noting that this estimate has been released nine months after the commencement of the year. This is deeply problematic for Registered Liquidators in that, unlike other regulated populations, liquidators must have their remuneration approved by creditors or Courts who may take no consideration of the cost impact of the IFM. This places an unreasonable burden on liquidators, especially those dealing in the SME space where remuneration is often unrecoverable.
Liquidators are already obliged to carry out significant, often unpaid work on behalf of ASIC and the government with ARITA’s research indicates the population of less than 700 liquidators has to write-off some $100 million in unrecoverable fees each year. This unique situation means liquidators are being double taxed by the IFM when they are already subsidising ASIC.
ARITA also reiterated concerns regarding the operation of the 'fees for service' model under the IFM highlighting the disproportionate increase in fees charged for applications for reporting relief, particularly in how these are applied to corporate groups, and the changes to fees charged by ASIC for its review of documents under scheme of arrangement provisions. In both of these instances the fees have increased in the range of 1000%.
More detailed information is provided in the submission.