Advisers’ good behaviour should be recognised through lower levies to fund the Australian Securities and Investments Commission (ASIC), the Association of Financial Advisers (AFA) says.

“The AFA considers if cost recovery is the primary aim of the model, the levy system should reflect where the costs are being expended with a behaviour-based system,” it says in a submission to Treasury.

“[This would] reward good behaviour with discounts on annual levies, rather than penalise poor behaviour with loadings.”

The AFA says the draft ASIC funding bill does not reflect such a system.

Since draft regulations for the cost-recovery system have not been released by Treasury, the association argues a reward system can still be introduced.

The AFA also criticises the lack of supporting documentation for the bill. It expected a regulatory impact statement to accompany it, but the Government has given no indication when this will happen.

“The reason the AFA considers a regulatory impact statement necessary for this reform is that there must be consideration of the quantum and impact of the levies upon small business practices,” the submission says.

“Small business practices must not be unfairly burdened by being required to carry the same averaged load as larger or institutional licensees.”

The AFA wants a levy in proportion with the risks each licensee type carries.

“It would also be unfair for a licensee that supervises several provisional financial advisers to pay the same annual levy as other equivalently sized licensees if its ASIC regulatory activities are not the same. The AFA queries why the draft bills do not recognise this difference.

“The AFA recommends Treasury reconsider the levy system with variable costs that recognise the differences in size of licensees being supervised.”