ASIC Supervisory Cost Recovery Levy Bill 2017 - Commentary on Ministerial Responses [2017] AUSStaCSBSD 198 (14 June 2017)

• Chapter 2
• Commentary on ministerial responses
• ASIC Supervisory Cost Recovery Levy Bill 2017
• Modified disallowance procedures1

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Chapter 2

Commentary on ministerial responses

2.1 This chapter considers the responses of ministers to matters previously raised by the committee.

2.2 Correspondence relating to these matters is included at Appendix 1.

ASIC Supervisory Cost Recovery Levy Bill 2017

Purpose	This bill is part of a package of bills. The bill seeks to impose a levy on persons regulated by the Australian Securities and Investments Commission
Portfolio	Treasury
Introduced	House of Representatives on 30 March 2017
Bill status	Before House of Representatives
Scrutiny principle	Standing Order 24(1)(a)(v)

2.3 The committee dealt with this bill in Scrutiny Digest No. 5 of 2017. The Minister responded to the committee's comments in a letter dated 30 May 2017. Set out below are extracts from the committee's initial scrutiny of the bill and the Minister's response followed by the committee's comments on the response. A copy of the letter is at Appendix 1.

Modified disallowance procedures^[1]

Initial scrutiny – extract

2.4 This bill seeks to impose a levy on persons regulated by the Australian Securities and Investments Commission (ASIC) to recover ASIC's regulatory costs. The amount of levy payable each year is to be set through a combination of regulations and legislative instruments. Regulations made by the Governor-General (and subject to the normal disallowance procedures) will set out the methods or formula that will be used to apportion ASIC's regulatory costs. Annual legislative instruments made by ASIC will set out certain information that will be input into these methods or formulas, including:

• the amounts to be input into the formulas for a particular financial year;

• the number of leviable entities in a particular class, sector or sub-sector for a particular financial year; and

• the amount of ASIC's regulatory costs for a financial year (including the extent to which these costs are attributable to each sub-sector).^[2]

2.5 The bill proposes to modify the disallowance procedures in relation to these annual legislative instruments in three ways. First, subclause 11(3) provides that these legislative instruments are not to take effect until the end of the disallowance period, or a later day specified in the legislative instrument. The explanatory memorandum notes that this is to ensure 'that ASIC is not able to collect amounts of levy before Parliament has had the opportunity to consider and scrutinise the matters included in those legislative instruments'.^[3] The committee welcomes this aspect of the modified disallowance procedures which will improve parliamentary oversight of these instruments.

2.6 Secondly, paragraph 11(2)(a) seeks to reduce the time that these instruments will be available for disallowance from the standard 15 sitting days to 5 sitting days. The explanatory memorandum states that this is necessary because if these instruments were subject to the usual disallowance period and ASIC was unable to collect a levy before the end of that period:

...the collection may take place over twelve months (and a full financial year) after the relevant regulation occurred. This would create considerable commercial uncertainty for ASIC's regulated population and detract from one of the strategic aims of cost-recovery, that is creating a price signal on the cost of regulation, to help shape ASIC's strategic priorities.^[4]

2.7 The committee notes this explanation for the proposal to reduce the time that the annual legislative instruments made by ASIC will available for disallowance from 15 to 5 sitting days. The committee has consistently raised scrutiny concerns where it is proposed to modify the usual disallowance process as this can significantly impact parliamentary oversight of delegated legislation. However, in light of the explanation provided, the committee leaves the question of whether the reduced disallowance period is appropriate to the Senate as a whole.

2.8 Thirdly, paragraph 11(2)(b) seeks to reverse the usual procedure in subsection 42(2) of the Legislation Act 2003 so that where a motion to disallow an instrument is unresolved at the end of the proposed 5 sitting day disallowance period, the instrument (or relevant provision(s) of the instrument) is taken not to have been disallowed and would therefore continue in effect. Normally, subsection 42(2) of the Legislation Act provides that where a motion to disallow an instrument is unresolved at the end of the disallowance period, the instrument (or relevant provision(s) of the instrument) are taken to have been disallowed and therefore cease to have effect at that time. Odgers' Australian Senate Practice notes that the purpose of this provision is to ensure that 'once notice of a disallowance motion has been given, it must be dealt with in some way, and the instrument under challenge cannot be allowed to continue in force simply because a motion has not been resolved.' Odgers' further notes that this provision 'greatly strengthens the Senate in its oversight of delegated legislation'.^[5]

2.9 Under the modified disallowance procedure in paragraph 11(2)(b), if a disallowance motion is lodged, but not brought on for debate before the end of the 5 sitting day disallowance period, the relevant instrument will remain in force by default. In practice, as the executive has significant control over the conduct of business in the Senate, there may be occasions where no time is available to consider the disallowance motion within the 5 sitting day disallowance period and therefore the instrument would prevail regardless of the attempt to disallow it. The explanatory memorandum provides no justification for this proposed reversal of the usual disallowance procedures in subsection 42(2) of the Legislation Act.

2.10 Noting the significant practical impact on parliamentary scrutiny of this measure, the committee requests the Minister's detailed justification as to why it is proposed to reverse the usual disallowance procedures in subsection 42(2) of the Legislation Act 2003 so that where a motion to disallow an instrument is unresolved at the end of the reduced disallowance period, the instrument will be taken not to have been disallowed and would therefore continue in effect.

Minister's response

2.11 The Minister advised:

The Committee has identified proposed paragraph 11(2)(b) in the Bill as a modified disallowance procedure as it reverses the procedure set out in subsection 42(2) of the Legislation Act 2003. This is because paragraph 11(2)(b) provides that where a motion to disallow an instrument is unresolved at the end of the reduced five sitting day disallowance period, the instrument would be taken not to have been disallowed and would therefore continue in effect.
The disallowance procedure has been reversed for the same reasons the disallowance period was shortened to five sitting days of each house, outlined in paragraphs 1.86 to 1.93 of the explanatory memorandum to the Bill. Namely, it will provide greater certainty, in a timely manner, to industry in relation to the levies that they need to pay.
Allowing the instruments to be disallowed by default following a disallowance motion would create significant commercial uncertainty for industry as the instrument would not take effect in cases where a motion is not resolved within the five day disallowance period. If this were to occur, the instrument would need to be tabled again and a new five day disallowance period would have to conclude before the instrument could actually take effect. The delay in the instrument taking effect may disrupt industry plans, budgets and cash flows. If the recovery of costs subsequently falls into the following financial year, industry would have to pay the levy for two years of ASIC's costs in one financial year.
The reversal of the disallowance procedure will ensure that the instrument is only disallowed if a motion to disallow is actually passed (not just if a motion is made). This change is appropriate in the circumstances because of the significant uncertainty it could otherwise create for industry. The change is also appropriate as the instrument provides only for factual details of ASIC's regulatory costs and the mechanistic application of the formulas and methods for determining the amounts of levy to be paid, which are prescribed in regulations. The regulations are subject to normal disallowance processes.

Committee comment

2.12 The committee thanks the Minister for this response. The committee notes the Minister's advice that it is proposed to reverse the usual disallowance procedure (so that where a motion to disallow an instrument is unresolved at the end of the reduced five sitting day disallowance period, the instrument would be taken not to have been disallowed and would therefore continue in effect) for the same reasons the disallowance period was shortened to five sitting days of each House. That is, that the modified disallowance procedures will provide greater certainty, in a timely manner, to industry in relation to the levies that they need to pay.

2.13 As noted above, under the modified disallowance procedure in paragraph 11(2)(b) of this bill, if a disallowance motion is lodged, but not brought on for debate before the end of the five sitting day disallowance period, the relevant instrument will remain in force by default. In practice, as the executive has significant control over the conduct of business in the Senate, there may be occasions where no time is available to consider the disallowance motion within the five sitting day disallowance period and therefore the instrument would prevail regardless of the attempt to disallow it.

2.14 The Minister states that 'allowing the instruments to be disallowed by default following a disallowance motion would create significant commercial uncertainty for industry as the instrument would not take effect in cases where a motion is not resolved within the five day disallowance period'. Furthermore, it is suggested that any 'delay in the instrument taking effect may disrupt industry plans, budgets and cash flows' and that if 'the recovery of costs subsequently falls into the following financial year, industry would have to pay the levy for two years of ASIC's costs in one financial year'.

2.15 The committee notes this advice in relation to the need for certainty and timeliness; however, the committee considers these concerns could be resolved through using well-established procedures of the Senate in the event that a disallowance motion is given in relation to one of these instruments, rather than reversing the usual disallowance process itself. Particularly in recent years, disallowance motions in the Senate have been subjected to time limits to ensure that the Senate is able to make a positive decision in relation to the disallowance motion before the expiry of the disallowance period (and thus prevent the relevant instrument from being taken to have been disallowed simply by the effluxion of time).^[6]

2.16 The committee therefore considers that, from a scrutiny perspective, it would be more appropriate that the usual disallowance procedures in subsection 42(2) of the Legislation Act 2003 apply to these instruments (that is, that instruments are taken to be disallowed if a disallowance motion remains unresolved at the end of the disallowance period). The committee notes that the proposed procedure (that would result in the instrument remaining in force if a notice of motion to disallow is not resolved) would undermine the Senate's oversight of delegated legislation in cases where time is not made available to consider the motion within the five sitting days. The committee considers that concerns regarding commercial uncertainty would be best dealt with by ensuring that any notice of motion to disallow was positively considered by the Senate (as is the usual approach in relation to disallowable instruments).

2.17 In relation to the proposal to reduce the disallowance period from the usual 15 sitting days to five sitting days, as noted in the committee's initial comments at paragraphs [2.6]–[2.7] above, the committee leaves the question of whether this aspect of the modified disallowance procedures is appropriate to the Senate as a whole.

2.18 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of reversing aspects of the usual disallowance procedure in relation to these instruments.

2.19 The committee also draws this matter to the attention of the Senate Standing Committee on Regulations and Ordinances for information.

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[1] Subclause 11(2).

[2] See subclauses 9(6) and 10(2).

[3] Explanatory memorandum, p. 22.

[4] Explanatory memorandum, p. 22.

[5] Rosemary Laing (ed), Odgers' Australian Senate Practice: As Revised by Harry Evans (Department of the Senate, 14^th ed, 2016), p. 445.

[6] Rosemary Laing (ed), Odgers' Australian Senate Practice: As Revised by Harry Evans (Department of the Senate, 14^th ed, 2016), p. 449.