The Australian Securities and Investments Commission (ASIC) is to scale back surveillance activities in some areas, including insurance, due to budget cuts.

Chairman Greg Medcraft says $44 million has been cut from its 2014/15 budget.

“We will look to mitigate risks arising from the lower levels of activity, but some changes are inevitable,” he told the Senate Economics Legislation Committee last week.

“Some examples of the changes in our consumer cluster are the credit and insurance team.

“There will be reduced proactive surveillance.”

Mr Medcraft says ASIC will focus on groups that have the greatest market impact, rather than smaller players.

“With the lower level of resources, we have had to adjust our risk appetite from focusing on areas we have assessed as medium risk and higher to those better than medium-high risk.

“We will rely more on intelligence we get from misconduct reports and complaints we receive.”

Mr Medcraft says the regulator spends about $33 million policing the financial planning industry but collects only $2.8 million in licence fees.

Committee members suggested a user-pays model could be adopted to fund policing.

“I think the user-pays funding model would actually provide economic incentives or a proper market price signal to drive regulatory outcomes that should be set by government,” Mr Medcraft said.

“The revenue collected has become increasingly misaligned with the cost of regulating different sectors, and recovering it through a user-pays funding model, through an outcome-focused user-pays model, can drive economic efficiencies and strengthen resilience.”

Mr Medcraft told the committee ASIC will cut 209 positions in the next year and is currently running a voluntary redundancy program.